query: Pay off credit card debt or earn employer 401(k) match?

positive: A matching pension scheme is like free money. No wait, it actually IS free money. You are literally earning 100% interest rate on that money the instant you pay it in to the account. That money would have to sit in your credit card account for at least five years to earn that kind of return; five years in which the pension money would have earned an additional return over and above the 100%. Mathematically there is no contest that contributing to a matching pension scheme is one of the best investment there is. You should always do it. Well, almost always. When should you not do it?

positive: Nope, take the match.  I cannot see not taking the match unless you don't have enough money to cover the bills. Every situation is different of course, and if the option is to missing minimum payments or other bills in order to get the match, make your payments.  But in all other circumstances, take the match. My reasoning is, it is hard enough to earn money so take every chance you can.  If you save for retirement in the process, all the better.

positive: "For easy math, say you are in the 25% tax bracket. A thousand deposited dollars is $750 out of your pocket, but $2000 after the match.  Now, you say you want to take the $750 and pay down the card. If you wait a year (at 20%) you'll owe $900, but have access to borrow a full $1000, at a low rate, 4% or so. The payment is less than $19/mo for 5 years.  So long as one is comfortable juggling their debt a bit, the impact of a fully matched 401(k) cannot be beat. Keep in mind, this is a different story than those who just say ""don't take a 401(k) loan."" Here, it's the loan that offers you the chance to fund the account. If you are let go, and withdraw the money, even at the 25% rate, you net $1500 less the $200 penalty, or $1300 compared to the $750 you are out of pocket. If you don't want to take the loan, you're still ahead so long as you are able to pay the cards over a reasonable time. I'll admit, a 20% card paid over 10+ years can still trash a 100% return. This is why I add the 401(k) loan to the mix.  The question for you - jldugger - is how tight is the budget? And how much is the match? Is it dollar for dollar on first X%?"

positive: "Agree with Randy, if debt and debt reduction was all about math, nobody would be in debt.  It is an emotional game. If you've taken care of the reasons you're in debt, changed your behaviors, then start focusing on the math of getting it done faster.   Otherwise, if you don't have a handle on the behaviors that got you there, you're just going to get more rope to hang yourself with.  I.e., makes sense to take a low-interest home equity loan to pay off high-interest credit card debt, but more likely than not, you'll just re-rack up the debt on the cards because you never fixed the behavior that put you into debt. Same thing here, if you opt not to contribute to ""pay off the cards"" without fixing the debt-accumulating behaviors, what you're going to do is stay in debt AND not provide for retirement. Take the match until you're certain you have your debt accumulation habits in check."

positive: I'd take the match, but I wouldn't contribute beyond your match, for two reasons:

positive: Mathwise, I absolutely agree with the other answers.  No contest, you should keep getting the match.  But, just for completeness, I'll give a contrarian opinion that is generally not very popular, but does have some merit.   If you can focus on just one main financial goal at a time, and throw every extra dollar you have at that one focus (i.e., getting out of debt, in your case), you will make better progress than if you're trying to do too many things at once.  Also, there something incredibly freeing about being out of debt that has other beneficial impacts on your life. So, if you can bring a lot of focus to the credit card debt and get it paid off quickly, it may be worth deferring the 401(k) investing long enough to do that, even though it doesn't make as much mathematical sense.  (This is essentially what Dave Ramsey teaches, BTW.)

positive: I would definitely be putting in enough to get the most out of the match.  Only reasons I can think of not too would be: Other than that, not investing in the 401(k) is turning down free money. Edit based on feedback in comments. The only time I would advocate number 1 is if you are intensely committed to getting out of debt, were on a very tight budget and had eliminated all non-essential spending. In that situation only, I think the mental benefit of having that last debt paid off would be worth more than a few dollars in interest.

positive: "There is a very simple calculation that will answer the question: Is the expected ROI of the 401K including the match greater than the interest rate of your credit card? Some assumptions that don't affect the calculation, but do help illustrate the points. You have 30 years until you can pull out the 401K. Your credit card interest rate is 20% compounded annually.  The minimum payoffs are being disregarded, because that would legally just force a certain percentage to credit card. You only have $1000.  You can either pay off your credit card or invest, but not both.  For most people, this isn't the case.  Ideally, you would simply forego $1000 worth of spending, AND DO BOTH  Worked Example: Pay $1000 in Credit Card Debt, at 20% interest.   After 1 year, if you pay off that debt, you no longer owe $1200.  ROI = 20% (Duh!) After 30 years, you no longer owe (and this is pretty amazing) $237,376.31.  ROI = 23,638% In all cases, the ROI is GUARANTEED. Invest $1000 in matching 401k, with expected ROI of 5%. 2a. For illustration purposes, let's assume no match After 1 year, you have $1050 ($1000 principal, $0 match, 5% interest) - but you can't take it out. ROI = 5% After 30 years, you have $4321.94, ROI of 332% - assuming away all risk. 2b. Then, we'll assume a 50% match. After 1 year, you have $1575 ($1000 principle, $500 match, 5% interest) - but you can't take it out. ROI = 57% - but you are  stuck for a bit After 30 years, you have $6482.91, ROI of 548% - assuming away all risk. 2c. Finally, a full match After 1 year, you have $2100 ($1000 principle, $1000 match, 5% interest) - but you can't take it out. ROI = 110% - but again, you are stuck. After 30 years, you have $8643.89, ROI of 764% - assuming away all risk. Here's the summary - The interest rate is really all that matters.  Paying off a credit card is a guaranteed investment.   The only reason not to pay off a 20% credit card interest rate is if, after taxes, time, etc..., you could earn more than 20% somewhere else.   Note that at 1 year, the matching funds of a 401k, in all cases where the match exceeded 20%, beat the credit card. If you could take that money before you could have paid off the credit card, it would have been a good deal. The problem with the 401k is that you can't realize that gain until you retire. Credit Card debt, on the other hand, keeps growing until you pay it off. As such, paying off your credit card debt - assuming its interest rate is greater than the stock market (which trust me, it almost always is) - is the better deal. Indeed, with the exception of tax advantaged mortgages, there is almost no debt that has an interest rate than is ""better"" than the market."

negative: If it were my money, I wouldn't put it in a 401(k) for this purpose. If you were working at a company that provided 401(k) matching, then it might be worth it to put the money in your employer's 401(k) because the employer chips in based on what you put in. But you're self-employed, so there's no matching unless you match it yourself.  (Correct?) So, given that there's no matching, a 401(k) arrangement would have more restrictions than a non-tax-advantaged account (like a bank account, or a taxable money market account).  This would be taxable in the year you earn the money, but then that's it. If you're expecting to pull out the money pre-retirement, I wouldn't put it in in the first place.

negative: "First to actually answer the question ""how long at these rates/payments?""-  These is nothing magic or nefarious about what the bank is doing. They add accrued interest and take your payment off the new total.  I'd make higher payments to the 8.75% debt until it's gone, $100/mo extra and be done. The first debt, if you bump it to $50 will be paid in 147 months, at $75/mo, 92 months. Everything you pay above the minimum goes right to the principal balance and gets you closer to paying it off.  The debt snowball is not the ideal way to pay off your debt. Say I have one 24% credit card the bank was nice enough to give me a $20,000 line of credit on. I also have 20 cards each with $1000 in credit, all at 6%. The snowball dictates that the smallest debt be paid first, so while I pay the minimum on the 24% card, the 6% cards get paid off one by one, but I'm supposed to feel good about the process, as I reduce the number of cards every few months.  The correct way to line up debt is to pay off the (tax adjusted) highest rate first, as an extra $100 to the 24% card saves you $2/mo vs 50 cents/mo for the 6% cards. I wrote an article discussing the Debt Snowball which links to a calculator where you can see the difference in methods. I note that if the difference from lowest to highest rate is small, the Snowball method will only cost you a small amount more. If, by coincidence, the balances are close, the difference will also be small.  The above aside, it's the rest of your situation that will tell you the right path for you. For example, a matched 401(k) deposit should take priority over most debt repayment. The $11,000 might be better conserved for a house downpayment as that $66/mo is student loan and won't count as the housing debt, rather ""other debt"" and part of the higher ratio when qualifying for the mortgage. If you already have taken this into account, by all means, pay off the 8.75% debt asap, then start paying off the 3% faster. Keep in mind, this is likely the lowest rate debt one can have and once paid off, you can't withdraw it again. So it's important to consider the big picture first.  (Are you depositing to a retirement account? Is it a 401(k) and are you getting any matching from the company?)"

negative: The best option for maximizing your money long-term is to contribute to the 401(k) offered by your employer. If you park your inheritance in a savings account you can draw on it to augment your income while you max out your contributions to the 401(k). You will get whatever the employer matches right off the bat and your gains are tax deferred. In essence you will be putting your inheritance into the 401(k) and forcing your employer to match at whatever rate they do. So if your employer matches at 50 cents on the dollar you will turn your 50 thousand into 75 thousand.

negative: "I'll add 2 observations regarding current answers.  Jack nailed it - a 401(k) match beats all. But choose the right flavor account.  You are currently in the 15% bracket (i.e. your marginal tax rate, the rate paid on the last taxed $100, and next taxed $100.) You should focus on Roth. Roth 401(k) (and if any company match, that goes into a traditional pretax 401(k). But if they permit conversions to the Roth side, do it) You have a long time before retirement to earn your way into the next tax bracket, 25%. As your income rises, use the deductible IRA/ 401(k) to take out money pretax that would otherwise be taxed at 25%.  One day, you'll be so far into the 25% bracket, you'll benefit by 100%   traditional. But why waste the opportunity to deposit to Roth money   that's taxed at just 15%? To clarify the above, this is the single rate table for 2015:  For this discussion, I am talking taxable income, the line on the tax return designating this number. If that line is $37,450 or less, you are in the 15% bracket and I recommend Roth. Say it's $40,000. In hindsight on should put $2,550 in a pretax account (Traditional 401(k) or IRA) to bring it down to the $37,450. In other words, try to keep the 15% bracket full, but not push into 25%.  Last, after enough raises, say you at $60,000 taxable. That, to me is ""far into the 25% bracket."" $20,000 or 1/3 of income into the 401(k) and IRA and you're still in the 25% bracket. One can plan to a point, and then use the IRA flavors to get it dead on in April of the following year.  To Ben's point regarding paying off the Student Loan faster - A $33K income for a single person, about to have the new expense of rent, is not a huge income. I'll concede that there's a sleep factor, the long tern benefit of being debt free, and won't argue the long term market return vs the rate on the loan. But here we have the probability that OP is not investing at all. It may take $2000/yr to his 401(k) capture the match (my 401 had a dollar for dollar match up to first 6% of income). This $45K, after killing the card, may be his only source for the extra money to replace what he deposits to his 401(k). And also serve as his emergency fund along the way."

negative: Separate from some of the other considerations such as the legality, it is likely going to be worth your will if you employer has company matching even if you have to pay the early withdraw penalty because the matching funds from your employer can be viewed as gains on the money deposited. For example, using round numbers to make the math easy: No 401(k) Deposit With 401(k) Deposit So as you can see there is a benefit to deferring some of the earnings to the 401(k) account due to the employer matching but the actual dollar amount that you would be able to take home will be different based upon your own circumstances. Depending upon what the take home would be at the end of the day the percentage return may or may not be worth the time involved with doing the paperwork. However, all of this only applies if you have to pull the money out early as once you hit 59.5 years old you can start withdrawing the money without the tax penalty in which case the returns on your initial deposit will be much more.

negative: Your comment regarding your existing finances is very relevant and helpful. You need to understand that generally in personal finance circles, when a strong earning 22 year-old is looking for a loan it's usually a gross spending problem.   Their car costs $1,000 /month and their bar tabs are adding up so the only logical thing to do is get a loan.  Most 22-year-olds don't have a mortgage soaking up their income, or a newborn.   With all of this in mind I essentially agree with DStanley and, personally, and many people here would probably disagree, I'd stop the 401(K) contribution and use that money to pay the debt.  You're still very young from a retirement standpoint, let the current balance ride and forego the match until the debt is paid.  I think this is more about being debt free at 22 quickly than it's about how much marginal money could be saved via 401(k) or personal loan or this strategy or that strategy.  I think at your age, you'll benefit greatly from simply being debt free. There are other very good answers on this site and other places regarding the pitfalls of a 401(k) loan.  The most serious of which is that you have an extremely limited time to pay the entire loan upon leaving the company.  Failure to repay in that situation incurs tax liability and penalties.   From my quick math, assuming your contribution is 8% of $70,000 /year, you're contributing something in the neighborhood of $460/month to your 401(k).  If you stopped contributing you'd probably take home a high $300 number net of taxes.  It'll take around 20 months to pay the loan off using this contribution money without considering your existing payments, in total you're probably looking at closer to 15 months.  You'll give up something in the neighborhood of $3,500 in match funds over the repayment time.   But again, you're 22, you'll resume your contributions at 24; still WAY ahead of most people from a retirement savings standpoint.  I don't think my first retirement dollar was contributed until I was about 29.  Sure, retirement savings is important, but if you've already started at age 22 you're probably going to end up way ahead of most either way.  When you're 60 you're probably not going to bemoan giving up a few grand of employer match in your 20s. That's what I would do. Edit: I actually like stannius's suggestion in the comments below.  IF there's enough vested in your plan that is also available for withdrawal that you could just scoop $6,500 out of your 401(k) net of the 10% penalty and federal and state taxes (which would be on the full amount) to pay the debt, I'd consider that instead of stopping the prospective contributions.  That way you could continue your contributions and receive the match contributions on a prospective basis.  I doubt this is a legitimate option because it's very common for employers to restrict or forbid withdrawal of employee and/or employer contributions made during your employment, but it would be worth looking in to.

negative: The managers of the 401(k) have to make their money somewhere.  Either they'll make it from the employer, or from the employees via the expense ratio.  If it's the employer setting up the plan, I can bet whose interest he'll be looking after. Regarding your last comment, I'd recommend looking outside your 401(k) for investing.  If you get free money from your employer for contributing to your 401(k), that's a plus, but I wouldn't -- actually, I don't -- contribute anything beyond the match.  I pay my taxes and I'm done with it.

negative: On my quarterly statement and the 401K plan website I can see the vesting for various categories. They total all these up and report the total balance and the vested balance. If I do the math I discover that the vested balance is equal to A + B + D + (60% of C) For my company at least, if I was to leave now I would get 60% of the Company match, which does include significant gains. This document for the Department of Labor discuss many aspects of 401K plans including vesting. In a defined contribution plan such as a 401(k) plan, you are always   100 percent vested in your own contributions to a plan, and in any   subsequent earnings from your contributions. However, in most defined   contribution plans you may have to work several years before you are   vested in the employer’s matching contributions. (There are   exceptions, such as the SIMPLE 401(k) and safe harbor 401(k), in which   you are immediately vested in all required employer contributions. You   also vest immediately in the SIMPLE IRA and the SEP.) Currently, employers have a choice of two different vesting schedules   for employer matching 401(k) contributions, which are shown in Table   2. Your employer may use a schedule in which employees are 100 percent vested in employer contributions after 3 years of service (cliff   vesting). Under graduated vesting, an employee must be at least 20   percent vested after 2 years, 40 percent after 3 years, 60 percent   after 4 years, 80 percent after 5 years, and 100 percent after 6   years. If your automatic enrollment 401(k) plan requires employer   contributions, you vest in those contributions after 2 years.   Automatic enrollment 401(k) plans with optional matching contributions   follow one of the vesting schedules noted above.

negative: The fact that you are planning to move abroad does not affect the decision to contribute to a 401(k). The reason for this is that after you leave your employer, you can roll all the money over from your 401(k) into a self-directed traditional IRA. That money can stay invested until retirement, and it doesn't matter where you are living before or after retirement age.  So, when deciding whether or not to use a 401(k), you need to look at the details of your employer's plan: Does your employer offer a match? If so, you should definitely take advantage of it.  Are there good investments available inside the 401(k)? Some plans offer very limited options. If you can't find anything good to invest in, you don't want to contribute anything beyond the match; instead, contribute to an IRA, where you can invest in a fund that you like.  The other reason to use a 401(k) is that the contribution limits can be higher. If you want to invest more than you are allowed to in an IRA, the 401(k) might allow that.  In your case, since there is no match, it is up to you whether you want to participate or not. An IRA will allow more flexibility in investing options. If you need to invest more than your IRA limit, the 401(k) might allow that. When you leave your employer, you should probably roll any 401(k) money into an IRA.

negative: My answer would be yes. In addition, I'm not sure that anything requires you to roll your current 401(k) into a new one if you don't like the investment options.  Keeping existing funds in your current 401(k) if you like their investment options might make sense for you (though they obviously wouldn't be adding funds once you're no longer an employee). As for the terms of the potential new 401(k), the matching percentage and vesting schedule match what I've seen at past employers.  My current employer offers the same terms, but there's no vesting schedule.

negative: HSAs are very similar to IRAs. Any investment returns grow tax-deferred and once you reach age 59 1/2 65, you can withdraw the funds for any purpose (subject to ordinary income tax), just like a traditional IRA. If you can afford to do so, I would recommend you to pay medical expenses out-of-pocket and let the funds in your HSA accumulate and grow. In general, the best way to allocate your funds is in the following order: Contribute to a 401(k) if your employer matches funds at a substantial rate Pay off high-interest debt (8% of more in current environment in 2011) Contribute to an IRA (traditional or Roth) Contribute to an HSA Contribute to a 401(k) without the benefit of employer matching One advantage of HSAs versus IRAs is that you don't have to have earned income (salary or self-employment income) in order to contribute. If you derive income solely from rents, interest or dividends, you can contribute the maximum amount ($3,050 for individuals in 2011) and get a full deduction from your income (Of course, you will need to maintain a high-deductible health plan in order to qualify). One downside of HSAs is the lack of competitively priced providers. Wells Fargo offers HSAs for free, but only allows you to keep your funds in cash, earning a very measly interest rate, or invest them in rather mediocre and expensive Wells Fargo mutual funds. Vanguard, known for its low-fee investment options, provides HSAs through a partner company, but the account maintenance charges are still quite high. Overall, HSAs are a worthwhile option as part of your investment plan.

negative: 401(k) can come in traditional and Roth forms, as can IRAs. Roth IRA money is not locked away for 40 years, only the earnings are locked away, and earnings can also be withdrawn for special cases. You might not be able to invest in an IRA if your income is too high, and if you don't get a match for your 401(k), that might not be the best option either. The biggest advantage of the 401(k) is the match (if it exists) if there's no match, the second biggest advantage is the tax deferral. If you are in a low tax bracket, that isn't as big of an advantage either. I would say that there are plenty of reasons why you might not max out the 401(k) for savings, but it's pretty easy to max out the Roth IRA if that makes more sense, so there aren't a lot of reasons why not.

negative: The company match is not earnings. My company deposits 5% of my income into my 401(k) and it appears nowhere except on the paperwork for the 401(k).  To be clear, it doesn't appear on any paystub or W2.

negative: "The original question was aimed at early payment on a student loan at 6%. Let's look at some numbers.  Note, the actual numbers were much lower, I've increased the debt to a level that's more typical, as well as more likely to keep the borrower worried, and ""up at night.""  On a $50K loan, we see 2 potential payoffs. A 6 year accelerated payoff which requires $273.54 extra per month, and the original payoff, with a payment of $555.10. Next, I show the 6 year balance on the original loan terms, $23,636.44 which we would need to exceed in the 401(k) to consider we made the right choice.  The last section reflects the 401(k) balance with different rates of return. I purposely offer a wide range of returns. Even if we had another 'lost decade' averaging -1%/yr, the 401(k) balance is more than 50% higher than the current loan debt. At a more reasonable 6% average, it's double. (Note: The $273.54 deposit should really be adjusted, adding 33% if one is in the 25% bracket, or 17.6% if 15% bracket. That opens the can of worms at withdrawal. But let me add, I coerced my sister to deposit to the match, while married and a 25%er. Divorced, and disabled, her withdrawals are penalty free, and $10K is tax free due to STD deduction and exemption.) Note: The chart and text above have been edited at the request of a member comment.  What about an 18% credit card? Glad you asked -  The same $50K debt. It's tough to imagine a worse situation. You budgeted and can afford $901, because that's the number for a 10 year payoff. Your spouse says she can grab a extra shift and add $239/mo to the plan, because that' the number to get to a 6 year payoff.  The balance after 6 years if we stick to the 10 year plan? $30,669.82. The 401(k) balances at varying rates of return again appear above. A bit less dramatic, as that 18% is tough, but even at a negative return the 401(k) is still ahead. You are welcome to run the numbers, adjust deposits for your tax rate and same for withdrawals. You'll see -1% is still about break-even.  To be fair, there are a number of variables, debt owed, original time for loan to be paid, rate of loan, rate of return assumed on the 401(k), amount of potential extra payment, and the 2 tax rates, going in, coming out. Combine a horrific loan rate (the 18%) with a longer payback (15+ years) and you can contrive a scenario where, in fact, even the matched funds have trouble keeping up. I'm not judging, but I believe it's fair to say that if one can't find a budget that allows them to pay their 18% debt over a 10 year period, they need more help that we can offer here. I'm only offering the math that shows the power of the matched deposit.   From a comment below, the one warning I'd offer is regarding vesting. The matched funds may not be yours immediately. Companies are allowed to have a vesting schedule which means your right to this money may be tiered, at say, 20%/year from year 2-6, for example. It's a good idea to check how your plan handles this. On further reflection, the comments of David Wallace need to be understood. At zero return, the matched money will lag the 18% payment after 4 years. The reason my chart doesn't reflect that is the match from the deposits younger than 4 years is still making up for that potential loss. I'd maintain my advice, to grab the match regardless, as there are other factors involved, the more likely return of ~8%, the tax differential should one lose their job, and the hope that one would get their act together and pay the debt off faster."

negative: When you leave an employer, 401(k) loans are immediately due (or within 30 days or 60 days). So maybe they are waiting to see if you will pay off your loan. If you wanted to transfer the loan as well, you need to talk to your new 401(k) plan administrator to find out if this even possible. If they say No and you don't pay off the loan, it will count as a premature distribution from your old 401(k) plan and possibly be subject to excise tax in addition to income tax.

negative: "I am failing to see why would a person get an IRA, instead of just putting the same amount of money into a mutual fund (like Vanguard) or something like that. Well, this isn't a meaningful distinction. The mutual fund may or may not be in an IRA. Similarly, the mutual fund may or may not be in a 401(k), however. So I'm going to treat your question as if it's ""why would a person get a mutual fund (like Vanguard) or something like that in an IRA, instead of just putting the same amount of money into the same mutual fund in a 401(k)."" Same mutual fund, same amount of money, narrowing your question to the difference between the two types of accounts, as stated in your question's title. Others have answered that to the extent that you really have no choice other than ""pick which type of account to use for a given bundle of money"", other than nobody having mentioned the employer match. Even if there were no other difference at all in tax treatment, it's pretty typical that 401(k) contributions will be matched by free money from the employer. No IRA can compete with that. But, that's not the only choice either: Many of us contribute to both the 401(k) and the IRA. Why? Because we can. I'm not suggesting that just-anybody can, but, if you max out the employer matching in the 401(k), or if you max out the tax-advantaged contribution limit in the 401(k), and you still have more money that you want to save in a tax-advantaged retirement account this year, you can do so. The IRA is available, it's not ""instead-of"" the 401(k)."

negative: If you're simply trading with your own money and have not incorporated, then you are not eligible for a solo 401(k).  Nerdwallet has an excellent Q&A on the topic here for example.  Solo 401(k) is only allowed to be funded with earned income, and capital gains are not earned income. From the IRS page on One Participant 401(k) plans: Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit Earned income is defined by the IRS here: But not including: Even more clearly, that page notes: There are two ways to get earned income: You work for someone who pays you or You own or run a business or farm Capital gains are certainly neither of these. Now, I have read several articles suggesting one way to go about using the Solo 401k.  All of them suggest that you would need to incorporate in some fashion that would require a Schedule C tax return, though, and be trading with the company's money rather than your own, and then pay yourself a wage from that.  In that case you would be eligible for a Solo 401(k), and you might even be better off as a result of all that maneuvering (even though you'll be taxed at a higher rate for any income you do keep, likely, and have to pay self-employment tax).

negative: >What makes you think anything would change? If they allowed Match money to be distributed tax free, they are missing out on a future tax revenue opportunity.  I agree that it's highly unlikely that matching contributions would be made entirely tax-free. If anything, I would expect employer contributions to be treated the same way that after-tax (non-Roth) 401(k) contributions are treated today to the extent that they exceed the new contribution limits. It's also possible that only individual contribution limits will be reduced and employer contribution limits will remain much higher - I haven't seen any reporting on the latter.  >I think the more likely way they would stick it to us is to sunset the Roth 401(k) all together and make plans go back to the old school pre-tax and after-tax only, where even the earnings on after-tax are taxed at distribution.  I'm optimistic that Roth 401(k)s are here to stay. Trump's priorities seem to be centered around short-term budget characteristics with far less concern for the long-term (as is characteristic of populist administrations in general), and eliminating Roth 401(k)s would be unpopular and have a negligible impact on tax revenue in the short term.

negative: "The ""Deferral"" for the 401k means that you're not collecting your pay immediately, but instead diverting it to a retirement account (Roth 401k in this case). This article defines deferral well: What is the difference between a regular 401(k) deferral (pre-tax) and a Roth 401(k) deferral?  Under either a regular 401(k) deferral or a Roth 401(k) deferral, you   make a deferral contribution by electing to set  aside part of your   pay (by either a certain percentage or a certain dollar amount).  For   a regular 401(k) deferral, the  taxable wages on your W-2 are reduced   by the deferral contribution; therefore, you pay less current income   tax.   However, you will eventually pay tax on these contributions and   earnings when the plan distributes the regular  401(k) deferrals and   earnings to you.  The result is that the tax on the regular 401(k)   deferrals and earnings is only  postponed.  A Roth 401(k) deferral is an after-tax contribution, which  means you   must pay current income tax on the deferral.   Since you have already   paid tax on the deferral, you won’t pay tax on it again when you   receive a distribution of  your Roth 401(k) deferral.  In addition, if   you satisfy cer tain distribution conditions, then you won’t have to   pay tax  on the earnings either.  This means  that the distribution of   the Roth 401(k) earnings can be tax free not just tax  postponed. Traditionally, this deferred compensation typically was directed to a 401k, but now that Roth 401k is another available option, deferred compensation can be directed there as well."

negative: This is called an in-plan Roth conversion and is discussed by the IRS here. If your 401(k) has a Roth option then it likely also has a provision to convert pre-tax dollars, but you'll have to check with the administrator to be sure. They could also potentially limit the type of money that can be converted. But most likely you should be able to convert any amount you want, and since it's all pre-tax (your contributions, employer matching, and earnings), it doesn't really matter which money is converted because it's all equivalent. One caveat is you won't able to convert any employer matching that hasn't fully vested.

negative: "Just like all employee benefits there is a focus on removing or limiting owners of businesses' ability to abuse tax preferences under the guise of an employee benefit. As you point out there is an overall plan maximum 401(k) for employer contributions and match contributions.  There is a nondiscrimination test for FSA programs (there is also a nondiscrimination test for medical plans under sections 125 and 105(h)).  Employer contributions are counted toward the total of HSA contributions.   Why an HSA has a different maximum arrangement than 401(k) is anyone's guess.  But the purpose of the limit is to prevent owners of companies from setting up plans that do little more than funnel tax free funds to themselves.  An owner/employee could pay themselves a wage, contribute the maximum, then have the ""employer"" also match the maximum, so there are limits in place."

negative: "One can generalize on Traditional vs Roth flavors of accounts, I suggest Roth for 15% money and going pretax to avoid 25% tax.  If the student loan is much over 4%, it may make sense to put it right after emergency fund.  For emergency fund priority - I'm assuming EF really requires 2 phases, the $2500 broken transmission/root canal bill, and the lose your job, or need a new roof level bills. I'm in favor of doing what let's you sleep well. I'm also quick to point out that if you owe $2500 at 18%, yet have $2500 in your emergency fund, you're really throwing away $450 in interest each year. There's an ongoing debate of ""credit card as emergency fund."" No, I don't claim that your cards should be considered an emergency fund, per se, but I would prioritize knocking off the 18% debt as a high priority. Once that crazy interest debt is gone, fund the ER, and find a balance for savings and the next level ER, the 6-9mo of expenses one. One can choose to fund a Roth IRA, but keep the asset out of retirement calculations. It's simply an emergency account returning tax free interest, and if never used, it eventually is retirement money. A Roth permits withdrawal of deposited funds with no tax or penalty, just tracking it each year. This actually rubs some people the wrong way as it sounds like tapping your retirement account for emergencies. For my purpose, it's a tax free emergency fund. Not retirement, unless and until you are saving so much in the 401(k) you need more tax favored retirement money. I wrote an article some time ago, the Roth Emergency Fund which went into a bit more detail.  Last - keep in mind, this is my opinion. I can intelligently argue my case, but at some point, it's up to the individual to do what feels right. Paying 18% debt off a bit slower, say 4 years instead of 3, in favor of funding the matched 401(k), to me, you run the numbers, watch the 401(k) balance grow by 2X your pretax deposits, and see that in year 3, your retirement account is jump-started and far, far more than your remaining 18% cards. Those who feel the opposite and wish to be debt free first are going to do what they want. And the truth is, if this lets you sleep better at night, I'm in favor of it."

negative: I'll respect the mod's suggestion. I'd answer with a warning. The concept of 401(k) pretax saving is to save at a high rate, while working, and withdraw at a lower rate. An annual expense pushing 1% or higher is likely to negate the benefit of the account over time.  If your employer offers the Roth 401(k), I'd suggest using that for your deposits, and only up to the match. Then invest outside the 401(k). In the 25% bracket, it's good to have a mix of both pre and post tax retirement money.

negative: "Your contribution limit to a 401(k) is $18,000.  Your employer is allowed to contribute to your 401(k), usually a ""matching contribution"".  That matching contribution comes from your employer, so is not subject to your personal contribution limit. A contribution to a regular 401(k) is typically made with pre-tax money (i.e. you don't pay payroll taxes on the money you contribute) so you pay less taxes for the current tax year.  However when you retire and you take money out, you pay taxes on the money you take out.  On one hand, your tax rate may be lower when you have retired, but on the other hand, if your investments have appreciated over time, the total amount of tax you pay would be higher. If your company offers a Roth 401(k) plan, you can contribute $18,000 of after tax money.  This way you pay the tax on the $18,000 today, as you would if you did not put the money in the 401(k), but when you take the money out at retirement, you would not have to pay tax.  In my opinion, that serves as a way to pay effectively more money into your 401(k). Some firms put vesting provisions on the amount that they match in your 401(k), e.g. 4 years at 25% per year.  So you have to work 1 full year to be entitled to 25% of their matching contribution, 2 years for 50%, and 4 years to receive all of it.  Check your company's Summary Plan Description of the 401(k) to be sure. You are not allowed to invest pre-tax money into a Traditional IRA if you are already contributing to a 401(k) plan and have reached the income limits ($62,000 AGI for single head of household). You are allowed to contribute post-tax money to a Traditional IRA plan if you have already contributed to a 401(k), which you can then Roll-over into a Roth IRA (look up 'backdoor IRA'). The IRA contribution limit applies to all IRA accounts over that calendar year.  You could put some money in a traditional IRA, a Roth IRA, another traditional IRA, etc. so long as the total amount is not more than the contribution limit. This gives you an upper limit of 5.5k + 18k = 23.5 investments in retirement accounts. Note however, once you reach age 50, these limits increase to 6.5k (IRA) + 24k (401(k)).  They also are adjusted periodically with the rate of inflation. The following approach may be more efficient for building wealth: This ordering is the subject of debate and people have different opinions. There is a separate discussion of these priorities here:  Best way to start investing, for a young person just starting their career? Note however, a 401(k) loan becomes payable if you leave your company, and if not repaid, is an unauthorised distribution from your 401k (and therefore subject to an additional 10% tax penalty). You should also be careful putting money into an IRA, as you will be subject to an additional 10% tax penalty if you take out the money (distribution) before retirement, unless one of the exceptions defined by the IRA applies (e.g. $10,000 for first time home purchase), which could wipe out more than any gains you made by putting it in there in the first place. Your specific circumstances may vary, so this approach may not be best for you.  A registered financial advisor may be able to help - ensure they are legitimate: https://adviserinfo.sec.gov"

negative: There is no Roth 401(k) match. Or to be clear, when an employee deposits to a Roth 401(k), the company match goes into the traditional, pre-tax 401(k) account.  That money is subject to both tax and 10% penalty on early withdrawal.

negative: I moved from contributing 10% to maxing as my salary rose over the course of three years after graduation.  Because of my raises, my monthly take home still increased, so it was a pretty painless way to increase my 401(k) contribution and also avoid lifestyle inflation. That said, I would not do it if you have any credit card debt, school loans, or an auto loan.  Pay that off first.  Then work on maxing the 401(k).  Personally I rate owning a home behind that, but that's partially because I'm in an area where the rent ratios are barely on the side of buying, so I don't find buying to be a pressing matter. One thing to investigate is if your company offers a Roth 401(k) option.  It's a nice option where you can go Roth without worrying about income limits.  My personal experience does not include a Roth IRA because when I still qualified for one I didn't know much about them, and now that I know about them I have the happy issue of not qualifying.

negative: The Mad Fientist has an article on this. He gives these following benefits: He also gives the caveat that your employer may not match things in their entirety. Like you mentioned, this mostly applies to 401(k)s and not to HSAs where the employer tends to contribute a fixed amount (in my experience). Anecdotally, my wife and I front-load our IRAs; but not our HSA and 401(k) because we don't have that option. In the comment section of the linked article, several big-name early retirees confess to front-loading before it was cool.

negative: "Your employment status is not 100% clear from the question.  Normally, consultants are sole-proprietors or LLC's and are paid with 1099's.  They take care of their own taxes, often with schedule C, and they sometimes can but generally do not use ""employer"" company 401(k).  If this is your situation, you can contact any provider you want and set up your own solo 401(k), which will have great investment options and no fees.  I do this, through Fidelity. If you are paid with a W2, you are not a consultant.  You are an employee and must use your employer's 401(k). Figure out what you are. If you are a consultant, open a solo 401(k) at the provider of your choice.  Make sure beforehand that they allow incoming rollovers.  Roll all of your previous 401(k)s and IRA's into it. When you have moved your 401(k) to a better provider, you won't be paying any extra fees, but you will not recoup any fees your original provider charged. I'm not sure why you mention a Roth IRA.  If you try to roll your 401(k) into a Roth instead of a traditional IRA or 401(k), be aware that you will be taxed on everything you roll. ---- Edit: a little info about IRA's in response to your comment ---- Tax advantaged retirement accounts come in two flavors: one is managed by your company and the money is taken out of your paycheck.  This is usually a 401(k) or 403(b).  You can contribute up to $18K per year and your company can also contribute to it.  The other flavor is an IRA.  You can contribute $5,500 per year to this for you and $5,500 for your spouse.  These are outside of your company and you make the deposits yourself.  You choose your own provider, so competition has driven prices way down.  You can have both a 401(k) and an IRA and contribute the max to both (though at high incomes you lose the ability to deduct IRA contributions). These accounts are tax advantaged because you only pay taxes once.  With a regular brokerage account, you pay income tax in the year in which you earn money, then you pay tax every year on dividends and any capital gains that have been realized by selling.  There are two types of tax-advantaged accounts: Traditional IRA or Traditional 401(k).  You do not pay income tax on this money in the year you earn it, nor do you pay capital gains tax.  Instead you pay tax only in the year in which you take the money out (in retirement). Roth IRA or Roth 401(k).  You do pay income tax on money on this money in the year in which you earn it.  But then you don't pay tax on any gains or withdrawals ever again. When you leave your job (and sometimes at other times) you can move your money out of a 401(k) into your IRA, where you can do a better job managing it.  You can also move money from your IRA into a 401(k) if your 401(k) provider will allow you to. Whether traditional or Roth is better depends on your tax rate now and your tax rate at retirement.  However, if you choose to move money from a traditional account into a Roth account, you must pay tax on it in that year as if it was income because traditional and Roth accounts are taxed at different times.  For that reason, if you are just trying to move money out of your 401(k) to save on fees, the logical place to put it is in a traditional IRA. Moving money from a traditional to a Roth may make sense, for example, if your tax rate is temporarily low this year, but that would be a separate decision from the one you are looking at. You can always roll your traditional IRA into a Roth later if that does become the case.  Otherwise, there's no reason to think your traditional 401(k) should be rolled into a Roth IRA according to what you have described."

negative: You might want to bring this fancy new IRS rule to your employer's attention.  If your employer sets it up, an After-Tax 401(k) Plan allows employees to contribute after-tax money above the $18k/year limit into a special 401(k) that allows deferral of tax on all earnings until withdrawal in retirement. Now, if you think about it, that's not all that special on its own.  Since you've already paid tax on the contribution, you could imitate the above plan all by yourself by simply investing in things that generate no income until the day you sell them and then just waiting to sell them until retirement.  So basically you're locking up money until retirement and getting zero benefit. But here's the cool part:  the new IRS rule says you can roll over these contributions into a Roth 401(k) or Roth IRA with no extra taxes or penalties!  And a Roth plan is much better, because you don't have to pay tax ever on the earnings.  So you can contribute to this After-Tax plan and then immediately roll over into a Roth plan and start earning tax-free forever. Now, the article I linked above gets some important things slightly wrong.  It seems to suggest that your company is not allowed to create a brand new 401(k) bucket for these special After-Tax contributions.  And that means that you would have to mingle pre-tax and post-tax dollars in your existing Traditional 401(k), which would just completely destroy the usefulness of the rollover to Roth.  That would make this whole thing worthless. However, I know from personal experience that this is not true.  Your company can most definitely set up a separate After-Tax plan to receive all of these new contributions.  Then there's no mingling of pre-tax and post-tax dollars, and you can do the rollover to Roth with the click of a button, no taxes or penalties owed. Now, this new plan still sits under the overall umbrella of your company's total retirement plan offerings.  So the total amount of money that you can put into a Traditional 401(k), a Roth 401(k), and this new After-Tax 401(k) -- both your personal contributions and your company's match (if any) -- is still limited to $53k per year and still must satisfy all the non-discrimination rules for HCEs, etc. So it's not trivial to set up, and your company will almost certainly not be able to go all the way to $53k, but they could get a lot closer than they currently do.

negative: I would always suggest rolling over 401(k) plans to traditional IRAs when possible.  Particularly, assuming there is enough money in them that you can get a fee-free account at somewhere like Fidelity or Vanguard.  This is for a couple of reasons. First off, it opens up your investment choices significantly and can allow you significantly reduced expenses related to the account.  You may be able to find a superior offering from Vanguard or Fidelity to what your employer's 401(k) plan allows; typically they only allow a small selection of funds to choose from.  You also may be able to reduce the overhead fees, as many 401(k) plans charge you an administrative fee for being in the plan separate from the funds' costs. Second, it allows you to condense 401(k)s over time; each time you change employers, you can rollover your 401(k) to your regular IRA and not have to deal with a bunch of different accounts with different passwords and such.  Even if they're all at the same provider, odds are you will have to use separate accounts. Third, it avoids issues if your employer goes out of business.  While 401(k) plans are generally fully funded (particularly for former employers who you don't have match or vesting concerns with), it can be a pain sometimes when the plan is terminated to access your funds - they may be locked for months while the bankruptcy court works things out. Finally, employers sometimes make it expensive for you to stay in - particularly if you do have a very small amount.  Don't assume you're allowed to stay in the former employer's 401(k) plan fee-free; the plan will have specific instructions for what to do if you change employers, and it may include being required to leave the plan - or more often, it could increase the fees associated with the plan if you stay in.  Getting out sometimes will save you significantly, even with a low-cost plan.

negative: Every $1,000 you use to pay off a 26% interest rate card saves you $260 / year.  Every $1,000 you use to pay off a 23% interest rate card saves you $230 / year. Every $1,000 you put in a savings account earning ~0.5% interest earns you $5 / year. Having cash on hand is good in case of emergencies, but typically if your debt is on high interest credit cards, you should consider paying off as much of it as possible. In your case you may want to keep only some small amount (maybe $500, maybe $1000, maybe $100) in cash for emergencies. Paying off your high interest debt should be a top priority for you. You may want to look on this site for help with budgeting, also. Typically, being in debt to credit card companies is a sign of living beyond your means. It costs you a lot of money in the long run.

negative: it is better for your credit score to pay them down over time. This is a myth. Will it make much of a difference? You are paying additional interest even though you have the means to pay off the cards completely. Credit score is a dynamic number and it really only matters if you are looking to make a big purchase (vehicle, home), or perhaps auto insurance or employment. Pay off your credit cards, consolidate your debt, and buy yourself a beer with the money you will be saving. :)


query: Investing in hemp producers in advance of possible legalization in Canada?

positive: "It is such a touchy subject for many people, I have to say that simple ""set it and forget it"" kind of investing isn't likely in the near term. Instead, if this is something you believe in, treat it like any other business opportunity and do some detailed research into people operating in the field.  Look into their business plans and visit their operations.  If there is a plan, and idea, a team and the intangible it you might consider doing some direct investing with a local company. Basically become a small business owner, silent partner or investor.  If you believe in it go for it.  If you don't believe in it that much, I think this is a market somebody else needs to develop before we invest."

positive: Hemp is already pretty easily grown by farmers here.  Canada had 50,000 acres of legal hemp in 2006, but it's been in decline the last 3 years due to the cost, lack of demand, and the high values of some other crops.  It's also difficult to harvest due to its size. It's possible that the demand for hemp products will increase, but given that many Asian countries (Russia, China and Korea, for example) never banned it in the first place, there's a pretty ready supply already in place.  In Canada, the big reason to grow it is as an alternative crop for use in rotation that has some commercial demand, but it's certainly not as valuable as crops like canola, oats or soy beans.

positive: The legalization of Cannabis will drastically alter supply and demand of cannabis and hemp. The distribution channels that work well for hemp may or may not work well for cannabis and may or may not continue to work well once cannabis is widely available. Companies may have avoided sponsoring hemp products because of it's association with marijuana.   If Marijuana is made legal, that stigma may or may not go away, changing which companies are interested in distribution. I don't believe that legalizing cannabis will create a great investing opportunity into existing hemp producers.

negative: "Mortgage interest in Canada is not generally tax deductible for individuals. (Where did you read otherwise?) As an individual, the only mortgage interest you may be able to deduct is when you borrow the money to purchase an income-producing asset, e.g another property you can rent out, or investments producing dividends or other income.  In these cases, the interest you pay on the borrowed funds, i.e. the ""carrying costs"" for your investments, would be deductible against the income produced by the investments purchased."

negative: Pineapple Flavored Gourmet Dietary Supplement Hemp Oil Infused Caribbean Edibles infused full spectrum hemp oil into all of our organic fruit-flavored products totally masking all of the original pomegranate hemp oil taste. Making it a delightful addition to your daily supplement intake. Every drop reminds you that amazing Caribbean trip with you loved ones.

negative: "sorry, my response was supposed to be to the above comment, not yours. My main point was that colonizing in Africa, where there was already a large population did not require bringing in people (which you would need to incentivize to move to, hence offering the ""free"" carrot of property rights to settlers of NA) to extract resources. Instead the British (and other European powers) just used the local populace to extract the resources. The main reason the US and Canada are well off is that property rights were established very early on and this encouraged people to ""invest"" and produce more because the higher production accrued to the producer and the producer would have legal recourse should a negative ""externality"" be put upon them by someone else. Obviously there were other reasons as well, but property rights are huge (this is true globally now) in encouraging people to ""grow"" their assets. Part of the reason Africa is still so screwed up is that many of their institutions and governments are too corrupt to protect their citizens' property rights, thereby discouraging investment and production."

negative: Organic product Circle Cereal Diamond CBD Hemp oil will help you to remember a bowl of sweet fruity enhanced grain loaded with drain, similar to the one we as a whole love for breakfast.  Precious stone CBD is a top of the line CBD Tincture oil which is mixed with premium CBD rich hemp oil.

negative: Mango Flavored Gourmet Dietary Supplement Hemp Oil Infused Caribbean Edibles infused full spectrum Mongo flavored hemp oil into all of our organic fruit-flavored products totally masking all of the original hemp taste. Making it a delightful addition to your daily supplement intake. Every drop reminds you of that amazing Caribbean trip took with your loved ones.

negative: Many gains to be had, but the two rules of investing are don't lose money. So if you are to invest in marijuana, wait until marijuana is legal, and wait for the market leader to emerge, and see what their financials are like. Then invest, with enough information.

negative: "That's actually a great question. I'm not really sure how much they're pumping into that sector yet, but I know Exxon and a few others are very interested in what renewable energy avenues they can take advantage of. This article is a little old, but gives a good overview (there are many others like it). I think a lot is still in the ""testing"" phase right now though. https://www.theguardian.com/business/2016/may/21/oil-majors-investments-renewable-energy-solar-wind"

negative: Investing in commodities is iffy in the best of times. Potash already has expectations priced in, so I prefer to play CNI, the railroad doing most of the hauling.  Uranium? No. Uranium has been touted for a decade or more without results. Thorium is the preferable future nuclear fuel, and there is lots of it.

negative: >They're not really that expensive   I have a Whole Foods and several other health foods stores around. Most of the produce is easily more expensive than my local Sprouts. For example, one bunch of kale is $1.99/ea at Whole Foods and &0.99/ea at Sprouts. But my favorite one that I've noticed is the Navitas Naturals brand hemp seeds are regular $9.99 at Sprouts and was on sale last week for $6.49. At Whole Foods, it's $14.99. I still shop at Whole Foods for some things, but will make the extra trip to Sprouts for everything else (especially since it's right down the street from each other).

negative: Caribbean Edibles infused full spectrum hemp oil into all of our organic fruit-flavored products totally masking all of the original guava flavored hemp oil taste. Making it a delightful addition to your daily supplement intake. Every drop reminds you of that amazing Caribbean trip took with your loved ones

negative: I'm not too sure. you'll need to open up new shops, so real estate, staff, computers, bank accounts, that's not even getting into farming weed. It'll definitely take a bite out of other vices for sure though.

negative: You are not limited in these 3 choices. You can also invest in ETFs, which are similar to mutual funds, but traded like stocks. Usually (at least in Canada), MERs for ETFs are smaller than for mutual funds.

negative: "It will depend somewhat on the rules where the company is formed, and perhaps how much you're talking about investing. I don't know about Canada, but when I've formed businesses in the U.S., I've been advised to invest some of the money as an equity investment, and the bulk of the remainder as a loan. You say ""more shares"", so it sounds like you've already invested some money and need to inject another round. If you make a loan to the company, make sure everything is done at arm's length -- you'll need to wear the hat of the Company Management and sign a contract with yourself, use a market-based interest rate, and make sure the company is paying you back with interest. An alternative which may work if you expect cash flow soon is to pay for certain expenses personally and then submit an expense report to the company, which will pay you back. Overall, a quick consultation with your accountant should be a relatively inexpensive way to get the best answer for your specific circumstances."

negative: It depends primarily on how the Canadian economy is designed i.e export oriented or import oriented. If you look at this, it shows more or less equal amount of exports and imports. For the specific case of Canada, the exports would become costlier, because of a costlier dollar, but at the same time imports would become cheaper. This is only a generalization, not specific goodswise, which would require a more detailed ananlysis. But investors have a different dilemma. Canadian investors would find  it cheaper to invest abroad so may channel their investments abroad because they may find it costlier to invest in Canada. While foreign investors would find it costlier to invest in Canada and may wait for later or invest somehwre else.  Then government may try to boost up investment and start lowering the interest rates, if it sees the rising dollar as detrimental for the Canadian economy and investments flowing abroad instead of Canada. But what would be the final outcome of the whole rigmarole is little difficult to predict, because something is arriving and something is departing and above all goverment is doing something or is going to do. But the basic gist is Canadian exporters will be sad and Canadian importers will be happy, but vice versa for foreign investors intending to invest in Canada.

negative: "10 to 20% return on investment annually. ""When I hear that an investment has a 10%+ return on it I avoid it because..."". In my opinion, and based on my experience, 10% annually is not an exageration. I start to ask questions only if one talks about return of 30% annually or more. These kind of returns are possible, but very rare.  What sort of things do we need to look out for with alternative investment? First the quality of the website and the documentation provided. Then the resume of the founders. Who are those guys? I check their LinkedIn profile. If they have none, I am out. A LinkedIn profile is a minimum if you manage an investment company. I also look for diversification and this is the case with Yieldstreet. How do we assess the risks associated with alternative investments? I would never put more than 10% of my capital in any investment, alternative ones included. I also try to find financial information on the promoter itself. In Yieldstreet case check the legal advisor. I remember an international fraud case I analyse. The promoter I investigated had seven small trust involved: in British Virgin Islands, in Panama, in Holland, in Portugal, in the United States and Canada plus a banking account in Switzerland and the biggest shareholding company in the Isle of Man. No need to talk about what happened after. The investors were all non residents in the juridictions involved and no legal recourse were possible. They lost everything. These promoters regularly change juridictions to avoid detection. As far as Yieldstreet is concerned, what I read and checked seems interesting. Thanks for your question. I will check it out myself more. I am also a very cautious investor. To evaluate alternative investments is difficult , but no need to be afraid or to avoid them. We are accredited investors after all."

negative: "Even though ""when the U.S. sneezes Canada catches a cold"", I would suggest considering a look at Canadian government bonds as both a currency hedge, and for the safety of principal — of course, in terms of CAD, not USD. We like to boast that Canada fared relatively better (PDF) during the economic crisis than many other advanced economies, and our government debt is often rated higher than U.S. government debt. That being said, as a Canadian, I am biased.  For what it's worth, here's the more general strategy: Recognize that you will be accepting some currency risk (in addition to the sovereign risks) in such an approach. Consistent with your ETF approach, there do exist a class of ""international treasury bond"" ETFs, holding short-term foreign government bonds, but their holdings won't necessarily match the criteria I laid out – although they'll have wider diversification than if you invested in specific countries separately."

negative: "Legal tender is by law any denominations of money printed by the Bank of Canada.  There is an exclusion to this in that it must also be acceptable to both parties of the transaction.  See the following link from the Bank of Canada on Legal Tender and look at the answer to the question of What is ""legal tender""? The reason retailers may refuse the ""legal tender"" is in the case of counterfeit prevention.  The stores that purchase the scanning machines are trying to be accommodating by deferring the decision to refuse the ""legal tender"" after verifying it (checking if it is acceptable)."

negative: that's just not possible. 27% of all US scientists are immigrants and so are 48% of all engineers.  America does not produce enough high educated/skilled workers.   MS build, or planned on building, a research facility around 5 years ago. They said they can't get enough professors and doctors with adequate education to fill the 9,000 positions. so they asked the INS how to proceed. the INS told them to fill H1b visa applications. that is only once a year and they might get, statistically, only 2000-3000 out of it of they're lucky because most will be rejected or just not get picked (it's a lottery).   MS asked Canada, Canada said do whatever, more taxes for us. MS built it in Ontario I think.  at the same time Google wrote that angry blog post in their corporate blog about how shitty the H1b situation is.

negative: "The fact that your shares are of a Canadian-listed corporation (as indicated in your comment reply) and that you are located in the United States (as indicated in your bio) is highly relevant to answering the question. The restriction for needing to be a ""qualified institutional buyer"" (QIB) arises from the parent company not having registered the spin-off company rights [options] or shares (yet?) for sale in the United States. Shares sold in the U.S. must either be registered with the SEC or qualify for some exemption. See SEC Fast Answers - Securities Act Rule 144. Quoting: Selling restricted or control securities in the marketplace can be a   complicated process. This is because the sales are so close to the   interests of the issuing company that the law might require them to be   registered. Under Section 5 of the Securities Act of 1933, all offers   and sales of securities must be registered with the SEC or qualify for   some exemption from the registration requirements. [...] There are regulations to follow and costs involved in such registration. Perhaps the rights [options] themselves won't ever be registered (as they have a very limited lifetime), while the listed shares might be? You could contact investor relations at the parent company for more detail. (If I guessed the company correctly, there's detail in this press release. Search the text for ""United States"".)"

negative: You could use HBB and other similar funds that exchange distributions for capital gains.  There's HXT and HXS which is Canada and US equity markets.  The swap fee + mer is a little more than some funds except for HXT which is very cheap. There's a risk for long term holders that this may eventually get banned and you're forced to sell with a gain at the wrong time, but this won't matter much if you're planning on selling in a few years.  You have to pay the capital gains tax eventually.  Note, the tax on distributions is really a long term drag on performance and won't make a big difference in the short term.

negative: Caribbean Edibles infused full spectrum hemp oil into all of our organic fruit-flavored products totally masking all of the original Pina colada hemp oil taste. Making it a delightful addition to your daily supplement intake. Every drop reminds you of that amazing Caribbean trip took with your loved ones.

negative: > ever eat paper?  Yeah, of course, plenty of times. Not (usually) intentionally, but sometimes a wrapper will get stuck, etc. Also, it's a good way to get rid of something if you don't have a lighter.  More so when I was a kid and messing around with 'secret notes' and the like but.. ..yeah, I've eaten paper.    Granted, I've probably eaten gold as well, and there are some benefits or health values of gold.. .. within the pseudoscientific / alt-health crowd.. ..not sure I buy into those but. ..it has some value.   But, nothing like paper. Obviously there are different materials used for making paper.. ... lots of barks have a value from a health perspective, a relative nutritional value. Growing the tree, depending on the type, can provide fruit, building materials, etc.. ..with the pulp providing a paper value. So, multiple benefits can come from paper.. ...and, that's just the post-harvest aspect.. well, the case of fruit I guess not.  but, there's the environmental benefits of trees and such as well; habitats for wild life, wind breaks, carbon sequestration. soil health, etc.  Multiple benefits, and that's just from tree-based paper.  If you expand it out to something like, say, hemp paper? well, there's the oil.. ... which can be used for fuel production, various other uses, and, most especially, the health benefits and consumption from it.. ...while the remaining fibers can be used for construction... be it compressed bricks, hempcrete (which has excellent values in strength, durability, insulation, weight-to-strength *ratio*, etc.  And, again, the health benefits of hemp oil... ...argued to be the single 'thing' you can consume solely (+ water) and get 100% of the nutrients you need.. ...in mixed ratios and obviously it isn't as great as other things in concentrations, but.. ..it's extremely nutritious.    Also, the plant is really good for the soil, again, habitats, sequesters carbon, helps to pull toxins and such *out* of the soil for bioremediation. Is quick to grow, grows densely, is durable, has minimal inputs needed, hardy, ... all around a great crop.  and, again, the health benefits of its oil are *combined* with its paper making capabilities. .... and, good strong paper too. has a great weight, feel, durable, can/will last a really long time if properly handled.. ..and has much wider variance *in* 'proper handling' than tree-based paper.  Solid product. You should look into it, ... here, I'll give you some links to help you out.  * [9 Health Benefits of Hemp Oil That You Should Know](http://www.zliving.com/wellness/natural-remedies/9-health-benefits-of-hemp-oil-that-you-should-know)  * [10 Incredible Benefits of Hemp Oil](http://herb.co/2016/10/17/incredible-benefits-hemp-oil/)  * [12 Ways Using Hemp Seed Oil Will Improve Your Health & Your Life](http://www.naturallivingideas.com/hemp-seed-oil/)  A bit sensationalistic in the headlines... and, well, as to be expected I suppose, but regardless, pretty great stuff!   ..and, again, that's just the oil. The post-oil-extraction pulp can still go on to be used for the more-applicable-to-conversation paper.  But, since USD's seem to be the main focus... ...though other countries are progressively (or more-progressively I suppose) utilizing even *more* durable plastic in their notes.. ..but, for USD, still paper.. and, as such, the more durable cotton paper.  Now, comparing cotton to hemp is really... .. [hemp wins nearly every time](https://www.davidwolfe.com/hemp-vs-cotton/)  but... cotton is cotton and, recent headline and social controversy of cotton flower decorations aside.. cotton is cotton. Most everything that I'm wearing right now is made of cotton. It's a nice fabric. Durable, flexible, soft, etc. Good stuff. Not the easiest to work with but, clearly not something the world is in short supply of.  but, that doesn't really address your point though exactly.. Like hemp, you can get cotton oil (or cotton seed oil to be more specific) from the plant while also getting the fibers that you'd need for paper production.   It's a bit of a 'mixed back' and definitely *not* as straight forward as hemp's purported health benefits (and I didn't even *get* into the CBD oil stuff that hemp can provide)... .  * [15 Benefits of Cottonseed Oil](http://www.searchhomeremedy.com/15-best-benefits-of-cotton-seed-oil/)  * [7 Amazing Benefits & Uses of Cottonseed Oil](https://www.organicfacts.net/health-benefits/oils/cottonseed-oil.html)  * [10 Best Benefits of Cotton Seed Oil](http://www.stylecraze.com/articles/best-benefits-of-cotton-seed-oil/#gref)  but, from there, things start to turn a little south, and weren't necessarily all that 'great' to begin with....  * [Is Cottonseed Oil Okay?](https://www.drweil.com/diet-nutrition/nutrition/is-cottonseed-oil-okay/)  * [3 Best and Worst Oils For Your Health](https://www.bonappetit.com/trends/article/3-best-and-worst-oils-for-your-health)   So, I suppose my point is... if I even really have a singular one... is that paper, regardless of source, has at least *some* sort of nutritional value.. or could anyway.  As well, the crops used to produce the paper have the capability of ranging from some medicinal qualities all the way up to a seemingly really beneficial quantity of nutrients and compounds. At worst, the crops provide a habitat for various organisms.   The problem with gold and paper currency is that, in the end, they're both inherently valued by the civilization that deems them valuable.   I mean, take the quantity of gold in reserves around the world. Cross that with the industrial uses of gold (of which there are many) and, in turn, cross that with the artistic value of it.  It's price isn't based on its use... it's based on similar principals *as* fiat (paper... and, increasingly, plastic) currency: society's perception that it has value.  Gold has many properties that are excellent for many applications... superior to most (all?) in certain cases. ...but, that's not why it's valued at its current price.   ..again, it's valued at its current price because of perceived value.  Even from an artistic perspective, the amount of gold used in the Palace of Versailles... for the paint and such, was 'minuscule' given how much of the palace is covered in gold. It was something like just a few ounces because the layering is so thin. Point: if 'the look of gold' was all that people were going for they could easily just use another metal coated in a very thin layer of gold and.. externally, the appearance would be the same effect and the weight could theoretically be even lighter (or heavier). But, people want *more* than 'just the look'. They feel that the gold itself has a value beyond just the 'look'.. ..and, for all intents & purposes, it *does*.   but *only* because they and other people choose to perceive it as having such.  I've traded gold (profitably) for over 20 years. I understand the arguments very well.. ..but, vs food? In the end, the gold is a means not an end.

negative: Invest heavily in the healthcare industry?  Unless you think that prices and profits will be disconnected.

negative: No. I have partaken of but not lately. It's only become non-taboo here in the last 10 years and I was raised to think it was bad and people who do it are slackers or lazy and the like. I've thankfully grown out of that old way of thinking and now know how profitable it is and feel this is a good venture to begin building a nice portfolio. I'd also like to get into real estate and solar and wind as well

negative: when investing in index funds Index fund as the name suggests invests in the same proportion of the stocks that make up the index. You can choose a Index Fund that tracks NYSE or S&P etc. You cannot select individual companies. Generally these are passively managed, i.e. just follow the index composition via automated algorithms resulting in lower Fund Manager costs. is it possible to establish an offshore company Yes it is possible and most large organization or High Net-worth individuals do this. Its expensive and complicated for ordinary individuals. One needs and army of International Tax Consultants / International Lawyers / etc but do I have to pay taxes from the capital gains at the end of the year? Yes Canada taxes on world wide income and you would have to pay taxes on gains in Canada. Note depending on your tax residency status in US, you may have to pay tax in US as well.

negative: U.S. companies have two fundamental problems not within their control (plus others of course)  1. Growth in China is slowing dramatically, cutting prices and demand for commodities we export.  Even companies like Yum (which owns KFC) are hurting)  2. European demand for finished and high tech products is down sharply.  So while American demand is trying to make a comeback, we are so inter-linked that American businesses cannot fix this by themselves.  If I were buying stock, I'd look at companies that produce and sell entirely in the U.S., Canada and Mexico.  Edit: And I'd stay the heck away from new investment in the BRICS  Edit2: And its fine (from an investment POV ) if companies source parts or material outside of the U.S./Canada/Mexico - just don't count on any sales strength to China or Europe or the BRICS.

negative: "This is a very interesting question.  Unfortunately, in the way you wrote the question the answer is no.  Essentially, you would be asking someone to give you a ~20% return for your cash on something that is almost guaranteed when holding your cash only gets them a <1% return.  Would anyone take the other side of that deal? Interestingly though, you can to some extent hedge surprises in health care costs.  For instance, investing in the healthcare industry as David Rice suggests is a partial hedge.  The prices of those industry stocks already has future expected cost increases included. However, if costs were to jump even higher than expected you would gain some of the added cost you would pay in healthcare back. Not that I recommend this strategy, as you lose diversification, but this is a valid and reasonable reason to slightly overweight american healthcare companies for someone in your situation.   Note that the Wiki article you mention talks about hedging surprises as well.  ""If at planting time the farmer sells a number of wheat futures contracts equivalent to his anticipated crop size, he effectively locks in the price of wheat at that time.""  Thinking that way you may actually be able to buy health insurance now for two or three years in the future essentially locking in expected price increases today.  Probably not the answer you were looking for, but the best analogy for what financial hedging truly does."

negative: I'm a bot, *bleep*, *bloop*. Someone has linked to this thread from another place on reddit:  - [/r/metacanada] [Canada Pension Plan Investment Board Invests US$400 Million in WME│IMG](https://np.reddit.com/r/metacanada/comments/6sdk52/canada_pension_plan_investment_board_invests/)  [](#footer)*^(If you follow any of the above links, please respect the rules of reddit and don't vote in the other threads.) ^\([Info](/r/TotesMessenger) ^/ ^[Contact](/message/compose?to=/r/TotesMessenger))*  [](#bot)

negative: "i really want to know. and you shouldn't lose hope because reddit says so. if you can show there is a market for this, and you have a legitimate plan with attainable objectives, sound financial backing, and you have contingency plans in place, and you truly believe in this idea and are willing to put everything you have into this idea, then go for it. but if this is a ""meh, it would be kinda cool if..."" type of business approach, then drop it immediately."

negative: I quite like the Canadian Couch Potato which provides useful information targeted at investors in Canada. They specifically provide some model portfolios. Canadian Couch Potato generally suggests investing in indexed ETFs or mutual funds made up of four components. One ETF or mutual fund tracking Canadian bonds, another tracking Canadian stocks, a third tracking US stocks, and a fourth tracking international stocks. I personally add a REIT ETF (BMO Equal Weight REITs Index ETF, ZRE), but that may complicate things too much for your liking. Canadian Couch Potato specifically recommends the Tangerine Streetwise Portfolio if you are looking for something particularly easy, though the Management Expense Ratio is rather high for my liking. Anyway, the website provides specific suggestions, whether you are looking for a single mutual fund, multiple mutual funds, or prefer ETFs. From personal experience, Tangerine's offerings are very, very simple and far cheaper than the 2.5% you are quoting. I currently use TD's e-series funds and spend only a few minutes a year rebalancing. There are a number of good ETFs available if you want to lower your overhead further, though Canadians don't get quite the deals available in the U.S. Still, you shouldn't be paying anything remotely close to 2.5%. Also, beware of tax implications; the website has several articles that cover these in detail.

negative: It depends on your goals. Without knowing more than the fact that you live in Mexico (and therefore presumably have future expenses in pesos) and that you are concerned about the purchasing power of pesos, I would suggest an inflation-linked peso-denominated investment, if one is offered.

negative: Although this scheme is likely to get shut down rather quickly by either your broker or credit card company some points you seem to have missed out on. Properly timed you should be able to get ~55 days of grace period (30 day billing cycle + 25 day grace period) assuming you pay everything off every month and charge immediately following the statement date.  You will need to avoid certain card issuers that code all transactions with financial institutions as cash advances (Citibank in paticular). If it is possible it would be in your best interest to lower cash advance limits to 0 to avoid any chance of cash advance fees. If your credit card attempts to process it as a cash advance the transaction will just be declined and you won't be out anything. Otherwise one cash advance fee will eat several months worth of profits. As far as investments with guaranteed principal goes the only thing you can realistically do is money market accounts and maybe treasury notes. Anything else and the short term price fluctuation may leave you high and dry. If this scheme were to work you would be much better off attempting to get rewards for the purchases than anything you could invest in. If you used a 2% card and churned it every month you would be looking at a 24% return on credit card rewards. Even 1% rewards gives you a 12% annual return which is going to beat anything you could invest the money in.