conversation: User (scaredycat401): "This may be ridiculous — but I am afraid to increase my 401(k) contribution rate because I worry about not having access to the money until I retire.\n\nI'm 26, and:\n\n* Live in NYC\n* Make just about $150K/year\n* Have a $9K emergency fund and no debts\n* Currently contribute 7% of my salary into a 401(k) and 1% into a Roth 401(k). This more than maxes out the employer match.\n\nSome retirement calculators are showing me that this isn't enough money to retire on (though others show it's OK assuming Social Security still exists).\n\nIn theory I could max out my 401(k) by increasing my contribution to 12% of my salary, **but I'm afraid to**. It seems crazy to me to lock up even more of my earnings for **40 years**.\n\nWhat if I ever want to do something like buy a house or a car, or invest in or start my own business? Or what if I end up in a crappy situation without a job, or have to move on short notice or who knows what? I can't/won't pull money out of retirement accounts to do that.\n\nMy Mint budget shows me that I actually have an extra $1300 a month, and that is usually how much extra I end up with in my checking account. I have automatic transfers setup to put $100 into a savings account and $400 into an index fund each month, which I like since I could theoretically cash them out at any time. This actually brings my savings rate up to about 12%.\n\nBut the idea of putting more into a retirement account that I can't really access until I'm 60ish...\n\nI have been in a poor financial situation in the distant past and grew up in a first-generation immigrant household, so maybe that's part of my fear. Am I just crazy? If so, has anyone struggled with a similar fear? How did you get over it?\n\nOr maybe I'm not that crazy and my current savings setup is just fine?\n\nThanks in advance. "
  Self: "&gt; In theory I could max out my 401(k) by increasing my contribution to 12% of my salary, but I'm afraid to. It seems crazy to me to lock up even more of my earnings for 40 years.\n\nThere's ways to access some of the money before that, but you are mostly correct, that it is inaccessible and subject to your investments. \n\nBut... another way to think of it is that every dollar you're taking home from the top of your income, like money that would be invested, you are paying at your marginal rate in both federal and state taxes.\n\nSo think of maxing out the account as a way to get a ~30% bonus on your cash by not paying taxes on it right now.\n\nSo if you were doing that $400/mo from the taxable account in your 401(k) instead, it'd be more like $520/mo, growing tax-free...\n\nHow much are you saving for the kinds of goals you mentioned, like buying a house or car?\n\nOut of curiosity, why are you electing to do any Roth 401(k) at all? I couldn't imagine doing that at that income."
  User (scaredycat401): "&gt; There's ways to access some of the money before that\n\nYeah, learned about some of these through this thread and it's nice to know they exist. Had no idea before.\n\n&gt; How much are you saving for the kinds of goals you mentioned, like buying a house or car?\n\nTo be clear, those were just hypotheticals, I don't have a concrete goal to purchase a house or a car. That said, I end up with about $1300/month that I just put into taxable investments.\n\n&gt; Out of curiosity, why are you electing to do any Roth 401(k) at all? I couldn't imagine doing that at that income.\n\nMostly a hedge. The marginal tax rate at this income is still only 28%, and I feel like there's a definite possibility that tax rates overall will go up in the next few decades."
  Self: "&gt;     Out of curiosity, why are you electing to do any Roth 401(k) at all? I couldn't imagine doing that at that income.\n&gt; \n&gt; \n&gt; \n&gt; Mostly a hedge. The marginal tax rate at this income is still only 28%, and I feel like there's a definite possibility that tax rates overall will go up in the next few decades.\n\nEven if they do, you still have SIGNIFICANT areas of income bracket space to fill up. \n\nI mean, if your bet is that a progressive/laddered income tax system goes away by the time you retire, I'd understand the bet, but otherwise I think you are rushing to spend 30%+ on taxes right now when you could pay much less later, or a similar amount.\n\nThis page explains some of those thoughts, though I think there are good reasons to hold a Roth IRA despite it's Rothiness for high income earners. I do not think that Roth 401(k)s have those benefits. \nhttp://www.gocurrycracker.com/roth-sucks/\n\nGood luck."
  User (scaredycat401): "The Roth also has the option of withdrawing contributions, which makes me feel a bit better about it.\n\nI'm now putting 11% of my paycheck toward the 401(k) and 1% toward the Roth 401(k). I'm happy with this for now."
  Self: "I believe the Roth 401(k) withdraw rules are the same as 401(k) rules, not Roth IRA withdraw rules."
  