Q. My wife and I, both in our early 30's, are socking away the maximum allowable into our company 401k plans. Both allow a 15 percent contribution rate, hers with a 50 percent match, mine 25 percent. We also contribute the maximum to our respective IRA accounts. This enables higher earners to invest more, while punishing people like my wife and me. Basically, the cap is constructed so no one is happy, which is not how politics is supposed to work.
Taxes beget complexity and complexity begets unhappiness.
For most single people and couples, this will absorb all additional savings and provide wonderful flexibility about taxable income in retirement. It won't reduce your tax bill this year but it will save taxes on future investment earnings. There will be absolutely no need to consider investments like variable annuities where your investment is tax deferred rather than tax-free. Questions of general interest will be answered in future columns.