The only thing I could add to this excellent, excellent advice is that if you have excess income and can fully fund a 401(k) and IRA and are still looking for places to invest, make sure, of course, to have your ordinary income assets, etc. in the tax deferred accounts and you capital gains assets in your taxable accounts. In sum, your entire portfolio allocation should eventually take into account the pre-tax and post-tax characteristics of each account. Do not diversify each account, but diversify your entire portfolio, making sure you are not trading in non-deferred accounts and receiving ordinary income, etc. in taxable accounts. Common sense to some, but not to all.
After this, this is the only time people should start looking into the tax deferred aspects of annuities and insurance vehicles (except for term).
Another poster is correct too about the ultimate distribution issues with RMDs. Make sure that you consult an experienced advisor in how to carefully manage these distributions from a tax perspective when you start thinking about retirement.
This is where a good tax advisor is really worth it!!!
Some people start taking out hugh lump sumps to meet the RMDs (triggering tremendous taxes in those years) when they should have been taking out distributions in these deferred accounts a few years before to cut down the tax impact of these forced distributions while leaving their taxable accounts in place. This is inverted from most people’s desire to always defer. In other words, you should visit with a CFP, CPA, or tax attorney when you start thinking about retirement.
