I know this is a tangent, but I think at least in the US putting money in tax-advantaged retirement accounts still usually makes sense. I’ll take the Roth 401k case, since it’s the easiest to argue for:
In worlds that somehow end up as a vague continuation of the status quo, you’ll want to have money at retirement.
The money is less locked up then it sounds:
If you want to withdraw just the contributions (and so untaxed) you can roll a Roth 401k over to a Roth IRA, if your employer allows this.
Five years from when you open your account there are options for taking money out tax-free (including gains) even if you’re not 59.5 yet. If you think you might want to live off your savings while you do something uncompensated you can take “substantially equal periodic payments”, but there are also ones for various kinds of hardship.
In an emergency you can take the money out now and owe taxes later.
The money is more protected than if you save it normally:
The first ~1.5M in your retirement account is protected from bankruptcy.
Means testing generally ignores retirement accounts but does include conventional ones. College financial aid that uses the more thorough CSS PROFILE is a partial exception here: the college does still look at the information, but often ignores them and is less likely to ask for them than if the money is in a conventional account.
If you lose a lawsuit, your 401k (but not an IRA) is protected from judgement creditors.
In future cases where people are trying to come up with rules about what counts as money you have right now, they’re much less likely to count retirement assets than regular ones, which is usually what you want.
(And both derive from a draft blog post I wrote in May but didn’t end up publishing because it had a modeling component that was only half baked. It would be great to be able to connect the probability that you’ll need money in different scenarios to the penalties for early withdrawal but it’s all kind of tricky.)
Datapoint: I put money in my pension.
I know this is a tangent, but I think at least in the US putting money in tax-advantaged retirement accounts still usually makes sense. I’ll take the Roth 401k case, since it’s the easiest to argue for:
In worlds that somehow end up as a vague continuation of the status quo, you’ll want to have money at retirement.
The money is less locked up then it sounds:
If you want to withdraw just the contributions (and so untaxed) you can roll a Roth 401k over to a Roth IRA, if your employer allows this.
Five years from when you open your account there are options for taking money out tax-free (including gains) even if you’re not 59.5 yet. If you think you might want to live off your savings while you do something uncompensated you can take “substantially equal periodic payments”, but there are also ones for various kinds of hardship.
In an emergency you can take the money out now and owe taxes later.
The money is more protected than if you save it normally:
The first ~1.5M in your retirement account is protected from bankruptcy.
Means testing generally ignores retirement accounts but does include conventional ones. College financial aid that uses the more thorough CSS PROFILE is a partial exception here: the college does still look at the information, but often ignores them and is less likely to ask for them than if the money is in a conventional account.
If you lose a lawsuit, your 401k (but not an IRA) is protected from judgement creditors.
In future cases where people are trying to come up with rules about what counts as money you have right now, they’re much less likely to count retirement assets than regular ones, which is usually what you want.
Expanded this into Retirement Accounts and Short Timelines.
(And both derive from a draft blog post I wrote in May but didn’t end up publishing because it had a modeling component that was only half baked. It would be great to be able to connect the probability that you’ll need money in different scenarios to the penalties for early withdrawal but it’s all kind of tricky.)