By Allison Berger via Iris.xyz
As financial advisors one of our primary goals is to coach our clients to save and invest, while directing those savings to the most beneficial accounts possible.
In the modern era that typically means saving as much in your 401k or employer sponsored plan as possible. While pre-tax 401k contributions can save you significant dollars now while also providing the benefit of tax deferred growth, often times a high contribution rate means making some sacrifices on the spending side now. So the question arises, can making these deferrals now actually lead to a problem later on?
Is a Large 401k Problematic?
I recently read an article that described one of the issues associated with a very large 401k.
The main problem that can arise is when you turn 70 ½ and Required Minimum Distributions must begin. If you have other significant sources of retirement income such as pensions and Social Security, you may not even need these RMDs to make ends meet.
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