There are two exceptions in shunning your 401k plan: You’re paying a very high effective tax rate and you’ve confirmed that you’re retirement tax rate will be less; or your employer matches some part of your contribution. Other than those two exceptions forget it. The first step in determining whether you should stay or leave your 401k plan is to calculate where you are in the progressive marginal tax system. There are three mitigating items that can lower your tax bill: exemptions, deductions and tax credits. (And based on your income you may or may not be able to take advantage of these items.) Once you’ve determined your tax bracket you can weigh the restrictions of your 401k against the tax savings of your contributions. Many middle class Americans are paying a blended tax rate of 18%. A $1,000 contribution saves $180 and over 30 years that tax savings totals $5,400. But when you take a distribution from your 401K, you pay ordinary income taxes on the distributions and those distributions figure in the calculation on the taxes you’ll pay on your Social Security benefits. Those annual taxes during retirement will exceed the tax deductions you saved during your working   Read more…