If a Mutual Market Fund returns 2.35% and has an expense ratio of 0.56%, is it better to place money inside an on-line savings account which returns 3.14%? The answer is obvious. However, what if the Money Market Mutual fund is inside a 401K. Let's ume no matching is involved to make the problem simpler. Placing money into the 401K has 2 tax benefits. It lowers the your taxable income and the money earned by the fund it tax deffered. Is it enough to overcome the lower return and expense ratio?
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