Wednesday, September 06, 2006

Fund your 401k!

A new NBER working paper reports that many Americans aren't using tax-favored saving as much as they should:
a significant number of households can perform a tax arbitrage by cutting back on their additional mortgage payments and increasing their contributions to tax-deferred accounts.... In the aggregate, these mis-allocated savings are costing U.S. households as much as 1.5 billion dollars per year.
I don't usually use this blog to give advice on personal finance, but I'll make this an exception. You should take full advantage of whatever tax-favored savings account (401k, 403b, Keogh, etc.) you have available. I have been doing so since I started working, and I am looking forward to retiring from Harvard soon to become a full-time blogger.