First off, if your employer matches some amount of your 401(k) contribution make sure to contribute at least the amount that will maximize their matching provision. This is basically free money and should be taken advantage of.
After this the situation becomes more complicated. Within a 401(k) you can contribute more tax-deferred income than you could if you were to make a contribution to an IRA under your own discretion. If avoiding taxes today is your concern, then you should probably try to max out your contributions to your 401(k). However, if paying taxes today isn't a major concern for you, then you could simply increase the amount of your take-home pay, then build a disciplined savings and investment approach in an after-tax account. If you have the discipline to do this then it may be a good solution. However, the risk is that you get used to larger paychecks and inflate your spending, or that your investment plan isn't as systematic as the regular contributions to your structured allocation within your 401(k),
There are a few other somewhat advanced strategies that can be used (including Roth IRAs, sytematic IRA/Roth IRA conversions, et al). I won't get into them here as the process is fairly complex and tax-sensitive. However, I'd be happy to do so offline.
Adam C. Harding, CFP®
For informational purposes only. Not to be considered investment advice.
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