Pre-Tax
note
This is an early work in progress.
After an emergency fund, this is the first savings bucket you want to fill. This is because it generally allows you to avoid paying taxes and your current rate. When you retire there is a 90+% chance you're going to be paying less in taxes, so you make money overall on this.
So, let's talk through this, because it represents a change from my past. This is one of the advantages of GitHub, you can watch the evolution of thought and decided whether or not I'm an idiot.
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Truth in AdvertisingThere have been times where I've wondered if my assets/income after I retire wouldn't be larger than when I was working. I've been incredibly lucky with my job, and investing, and I just don't see it happening. I suspect that's true for 95+% of people, so plan for the expected, not the unlikely.
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Pre-tax BucketsThese are generally pretty limited, but they include:
- 401K / 403b
- Health Savings Account (HSA)
- Deductible IRA
- Various public service jobs benefits that I'm ignorant of (aka 457b)
If your employer offers any type of matching, you should make sure you take advantage of that. After that it's about trading off convenience and the quality of the investment options (i.e. low cost index funds)