Option #1: Go for the retirement account first, then think about investing the rest of your savings.

Option #2: Pour everything you can into a real-estate purchase, new business or current business expansion or stock purchase in good but undervalued companies, while studying all of these types of investments diligently as to control risk.

Both options are better than doing nothing or spending all your income, but in my opinion, Option#2 gets you a higher number faster. And in the long run, the amounts that you would have saved in taxes from retirement accounts are null and void when you have 10-50k(or higher!)/month in passive income coming in and your free to live your life’s purpose, now, rather than safely ‘getting by’ at 60.

@ Ryan – There’s nothing wrong with saving $4,200 in taxes … that’s an instant 42% ‘return’ … pretty hard to get in ANY market; the problem is: what comes next?

- You can’t touch that money without penalties until you’re pretty old

- You pay taxes at income tax rates rather than capital gains tax rates (but, who knows what will happen to these relative rates … this could become an advantage in 30 years?!) when you do withdraw the money

- Your 42% return is only year one; in year two and onwards you are tied to mutual fund returns MINUS fees.

On the other hand, if you used your S-corp (or, c-corp / LLC / or trust, depending upon what your attorney/accountant recommends) to purchase an income-producing investment, I can pretty much guarantee [ AJC:keeping in mind that this is an opinion column, NOT investment advice ]that you won’t give a hoot about that $4.2k tax saving in 10 years.

But, if you have nothing better to do with $10k, then the 401k option is better than the CD or spend options

Anybody else want to venture an opinion?

Here is my real world example: If I don’t put any money into my retirement account, I will pay $7,000 in taxes. If I put $10,000 in my IRA I pay $2800 in taxes (around $20K would have me owing $0). My decision was to invest $10,000 to keep from paying $4,000 in taxes.

I get that if I already have investment property or the like I could have further write offs and perhaps not be faced with this scenario, but other than my current S corp, I don’t have them yet (and what a motivation to get them!). What would you guys do in my current situation?