401k’s generally have a limited number of funds available to trade.
I think the reasoning is to protect the employee from poor investments. I’ve never seen one that allows you to trade on individual stocks, only funds.
I think the reasoning is to protect the employee from poor investments. I’ve never seen one that allows you to trade on individual stocks, only funds.
The problem with GP's scheme isn't that there's a good reason you can't hold whatever security you want in your retirement account: it's that you can't make the contribution in-kind from a taxable brokerage to your tax-advantaged 401(k)/IRA.
It's true that that's rare: but that's because your employer is giving you a shitty 401(k). Ask me about the Latacora 401(k) one day.
There are tons of added benefits to having your money in a place where you can actually control it (i.e. buy specific stocks with no maintenance fees). I am starting to see the tax deferral status as a sales tactic to lock people into lucratively-managed funds. There are so many ridiculous constraints around how much you can contribute that the tax deferral feels meaningless once you put all of the factors together over a truly meaningful sum of money.
All of that said, I am totally onboard with encouraging healthy savings habits for the masses, but for more advanced users there are definitely better options out there.
To make a point specifically toward Telsa - I feel working for one of Elon's companies is sort of a risk in and of itself. You know you are going to be worked harder and maybe be compensated less. The stock offering is paltry for the average case when considering the volatility of the underlying and lack of diversification. For the advanced user case, TSLA might make perfect sense. More savvy employees may decide to trade their TSLA shares on their brokerage or directly through other platforms in order to build a more diversified portfolio.
401k to match (which would mean 0 if no match)
IRA (Roth preferred if an option) to max
Then 401k to max individual contribution
The reason is related to what you describe. Brokerage accounts (typical of IRAs) give you much more freedom and often much better investment options (often better index funds, if nothing else). The reason to go back and max the 401k is the tax advantage in retirement. And if the funds were bad (mine aren't, fortunately), you could always move your 401k into your IRA.
Me and my fellow bogleheads are ... skeptical.
Then, I encountered about a decade of real-world experience and actually tried my hand at investing in things that made a lot of sense to me, not based on historical pricing or other ridiculous voodoo, but based upon my knowledge of those securities relative to my experience in the technology sector. At no point do I screw with day trading or options. Simple long positions gets the job done. Risk still must be managed, even if we decide we are OK with more of it.
I will absolutely grant you that the boglehead methodology makes sense if you dont want any stress at all regarding your investments, or otherwise have concerns that actively managing your money would devolve into a gambling addiction. For most people, this is probably the best path.
If you consider where the incentives and power lie in the system, you might come to the realization that these ideologies might be based upon ulterior motives which are at your expense. If you are managing trillions of dollars in 401k assets, the last thing you want is for everyone to take full ownership of their portfolios and divest from managed funds.
Saying that your brokerage account substantially outperforms your retirement account is perfectly compatible with a Boglehead perspective: all that means is that your brokerage account holds SCHB and your retirement account holds some infernal actively managed trash from Voya or whatever.
There's a clear broken incentive there: a 401(k) manager with a sibling advisory firm will happily be the loss leader on giving companies 401(k)s for free because they'll make up for it in management fees. This is strictly bad for employees, who rarely have the knowledge to differentiate between 401(k) plans and even more rarely have the agency to do anything about it.
Employees are in a position to speculatively contribute to their 401K not knowing if the offered match is going to happen.
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It is the third straight year the automaker has not made any contributions to its 401(k) plan, according to the filing.
The Tesla Inc. 401(k) Plan automatically enrolls participants in the plan with a deferral rate of 5% of employees' salaries with the option to contribute more, according to the plan's most recent Form 5500 filing.
According to the Form 5500, the plan allows for an "employer discretionary matching and/or an employer discretionary non-elective contribution subject to certain eligibility requirements." Those requirements were not met for the 2019 plan year, according to the Form 5500.
The nature of those requirements for Tesla to make contributions to the 401(k) plan was not available. The stock price for the automaker was up 695% for the year ended Dec. 31.