Over here, we don't have that 401K except for some big companies that provide that benefit. Some other enterprising employees would invest in money market that they say would be the equivalent of their retirement pay. They would set aside an amount regularly and place it in mini money market and when the amount is large enough for the real money market, then they would invest there. However, that small money market is not that safe.
Over here the 401k thingy is completely horrible. Just makes very little sense. But glad I'm moving to another country next year! Maybe things are better there. If not then I'll just continue growing my taxable investment account, it hurts a bit to pay high taxes on every dividend but it's not easy to escape.
What country do you live in, Corzhens? Can you open up an account in another country online from where you are?
A 401k *is* an investment account. You use it to invest in whatever you like: stocks, bonds, mutual funds, CD's etc. Using a 401k over a normal brokerage account is recommended because the money you put in there is tax deferred and you generally get matching money (a.k.a. "free money") from your employer. The deferred tax means you pay no tax on the portion of your income you invest at the time of investment, and you pay that tax after retirement when it is likely to be much lower, at the rate of ordinary income. (win/win/win). I struggle to see why someone saving for retirement would consider a brokerage account superior to a 401k.
The only benefit I can see in a 401k account is that there is the employer match and you have have money deposited into your account straight from your paycheck. It is nice that the money is tax deferred because it can actually put you in a lower tax bracket if you are teetering on the edge.
I live in the Philippines. I actually work in a bank but I'm not sure if I can open a bank account in another country, haven't explored that option yet. As for the 401k substitute, I have organized a small credit union in our office and it has been going on for so many years now. But it's not the 401k substitute yet because the tradition is to contribute money and lend the same to members in need, with interest. At the end of the year, we divide everything and we start from zero again in January. I am thinking that if the money would not be divided and would serve as substitute for 401k, I guess many would agree especially those past 50 years old like me.
