Every year around bonus time, inevitably someone will ask why bonuses are taxed at a higher rate than ordinary income.
The answer is that it depends on various factors, but on average the Traditional 401(k) is the way to go.
Are you skipping 401(k) contributions because you’re afraid you might have to pay the 10% early withdrawal penalty? It’s not such a big deal.
One benefit of a taxable investing account is that you can take advantage of tax loss harvesting.
It pays to make sure you have access to tax-free money, tax-deferred money and some taxable money, especially during the withdrawal phase of retirement.