Professional investors regularly lag behind the market, so we should respect their expertise when they ridicule ordinary investors.
I WAS SCROLLING through social media recently and saw somebody dismiss retirement accounts as “paper wealth.” The argument was familiar: Your money is locked away and you’re waiting for permission to access it.

There’s a grain of truth here. Retirement accounts do come with rules. But much of the discussion online ignores how flexible these accounts actually are. More important, it ignores the enormous tax advantages.
Most people today will likely live well beyond age 59½. Many will spend two or three decades in retirement. Even if somebody retires early, they’ll still need assets later in life.
That’s why ignoring retirement accounts at age 30 often isn’t wise. You could end up giving away 30 or 40 years of tax-advantaged compounding.
It also isn’t an all-or-nothing decision. We can use taxable brokerage accounts, Roth IRAs and 401(k)s together. Each account serves a different purpose.
Retirement accounts also provide rebalancing flexibility that taxable accounts don’t.
Inside a Traditional or Roth IRA, investors can rebalance portfolios without triggering capital gains taxes. Somebody who wants less stock market exposure can freely sell shares and buy bonds, Treasurys or other funds without generating an immediate tax bill. That matters over long periods of time.
The other misconception is that retirement accounts are completely inaccessible until age 59½.
Let's talk about Rule 72(t), also called Substantially Equal Periodic Payments, or SEPP. This IRS rule allows penalty-free withdrawals before age 59½ if specific requirements are followed.
Using online 72(t) calculators, a $500,000 retirement account could potentially generate annual withdrawals of roughly $30,000 while avoiding the normal 10% early-withdrawal penalty:

The payments must continue for a required period and the IRS rules are strict. Still, the broader point remains: There are legal ways to access retirement funds earlier than many people realize.
The Rule of 55 is another example.
If you leave your employer during or after the year you turn 55, you can often withdraw money from that employer’s 401(k) without the normal 10% penalty. Again, the money is not completely locked away until 60.
Roth IRAs may also be flexible. Contributions can be withdrawn anytime tax- and penalty-free because taxes were already paid before the money went into the account.
That doesn’t mean people should tap retirement accounts early. But accessibility is very different from impossibility.
Roth IRAs also happen to be among the most powerful wealth building tools available.
Qualified withdrawals are tax-free. Dividends compound without yearly tax bills. Investors can buy and sell investments inside the account without triggering taxable events.
You may remember a famous example about Peter Thiel. According to reporting by ProPublica, Thiel reportedly grew a Roth IRA from $2,000 to more than $5 billion between 1999 and now. He turns 59½ in 2027, meaning those withdrawals could potentially be tax-free. Imagine if he had decided to skip retirement accounts because he wanted to “live now.”
Employer matches are another point often ignored online. Skipping a 401(k) match can be one of the costliest financial mistakes people make.
Suppose an employer offers a dollar-for-dollar match on the first 3% of salary contributed to a 401(k). Before the investments even grow, that’s effectively an immediate 100% return.
Very few opportunities offer that kind of risk-adjusted benefit.
In fact, somebody could theoretically contribute, collect the employer match, later withdraw the money, pay ordinary income taxes plus the 10% penalty, and still potentially come out ahead versus investing only through a taxable brokerage account with no match.
The tax advantages extend beyond employer matches.
Inside retirement accounts:
Compare that with a taxable brokerage account, where dividends may create yearly tax bills and selling appreciated shares can trigger capital gains taxes.
Retirement accounts can also create opportunities for tax arbitrage.
Somebody contributing while in the 22% or 24% marginal federal tax bracket today might eventually withdraw money while in the 10% or 12% bracket during retirement.
State taxes can widen the advantage even more. Some states provide tax deductions on retirement contributions while later taxing retirement withdrawals lightly or not at all.
Early retirees often use Roth conversion ladders as well.
The process generally works like this:
Like Rule 72(t), there are strict rules involved. But these strategies exist because retirement accounts were never designed to be prison cells.
The larger point is that retirement planning should involve multiple tools working together. Taxable brokerage accounts provide flexibility. Roth IRAs provide tax-free growth. Traditional retirement accounts can reduce taxes during high-earning years.
None of these accounts are perfect by themselves. Together, however, they can create an extremely efficient system for building long-term wealth.
That’s why describing retirement accounts as “paper wealth” misses the bigger picture.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts. [xyz-ihs snippet="Donate"]
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.NO. 57: WE FAVOR possessions for their lasting value, but often we get greater happiness when we spend money on experiences. Forget the new car. Instead, take the family to Paris.
NO. 69: RECEIVING a pension or Social Security benefits is akin to owning bonds. Most pensions are like a fixed-interest bond, while Social Security is like an inflation-indexed bond. One implication: If you’ll receive a hefty portion of your retirement income from these two sources, you may have the leeway to invest more heavily in the stock market.
MARKET EFFICIENCY. As news breaks that effect the economy and individual companies, investors immediately buy and sell stocks in response, so share prices reflect all publicly available information. Because the market is so efficient, it’s all but impossible for investors to beat the market averages over the long haul, especially after figuring in their own investment costs.
SHARE YOUR PAYSTUB and financial statements with your kids. This show and tell will give you a chance to discuss the importance of saving, the power of compounding, and how much of your income goes toward taxes, housing and other items. Any one conversation might be brief and appear to have little impact. But over time, your children will learn a lot.
NO. 57: WE FAVOR possessions for their lasting value, but often we get greater happiness when we spend money on experiences. Forget the new car. Instead, take the family to Paris.
IN THE SUMMER of 1966, author John McPhee spent two weeks lying on a picnic table in his backyard. Why?
McPhee was suffering from writer’s block. As he described it, “I had assembled enough material to fill a silo, and now I had no idea what to do with it.”
Investors find themselves in a similar situation today. There’s no shortage of financial information around us. But that doesn’t make it easier to know what to do with it.
LAST WEEK, OPENAI founder Sam Altman sat down for an interview with venture capitalist Brad Gerstner and Microsoft CEO Satya Nadella. Both are investors in OpenAI, so it seemed like a friendly audience. But Gerstner posed a question that seemed to make Altman uncomfortable.
Since introducing ChatGPT three years ago, OpenAI has posted impressive growth, but Gerstner wondered whether the company was, nonetheless, getting ahead of itself.
“How can a company with $13 billion in revenues make $1.4 trillion of spend commitments?” Gerstner asked.
STOCK MARKET Investing requires a near superhuman ability to withstand pain. That’s the conclusion of a recent report by investment researcher Michael Mauboussin.
Mauboussin surveyed all stocks trading on U.S. exchanges over a 40-year period, between 1985 and 2024. He found that the median stock experienced a decline of 85% at one point or another. Worse yet, more than half of these stocks never fully recouped their losses. The median stock recovered to just 90% of its prior high-water mark.
IN APRIL 2005, art dealers Robert Simon and Alex Parish traveled to New Orleans to attend an auction. They were particularly interested in a work titled Salvator Mundi. The painting was in bad shape, having been neglected for years. But Simon and Parish ended up bidding on it and taking it home for $10,000.
After some restoration work, the pair succeeded in having it authenticated as a work of Leonardo da Vinci.
RECENTLY, The Wall Street Journal ran a story about a new type of investment known as a digital stock token. For now, they aren’t available in the U.S., but they’re coming soon, so it’s worth taking a closer look.
What are stock tokens? At the most basic level, they’re a technology designed to make stock market investing quicker and easier than it is today. With tokens, trading won’t be limited to traditional business hours.
I prepared this article as “homework” for a personal finance elective at a college-preparatory high school I might be contributing to in the Fall. Perhaps it would be helpful to parents whose kids are smitten with the Magnificent 7 or crypto.
After a stock market decline, people may perceive more risk than before, when the decline may have taken some of the risk out of the market.
—Robert Shiller
The investor’s chief problem—and even his worst enemy—is himself.
Should Retirees Get a Temporary Flat Tax Window on IRA and 401(k) Withdrawals?
Jeff Peck | May 18, 2026
First Job, Lasting Impact
D.J. | May 14, 2026
Retirement Accounts
ArticleBogdan Sheremeta | May 16, 2026
I WAS SCROLLING through social media recently and saw somebody dismiss retirement accounts as “paper wealth.” The argument was familiar: Your money is locked away and you’re waiting for permission to access it.
There’s a grain of truth here. Retirement accounts do come with rules. But much of the discussion online ignores how flexible these accounts actually are. More important, it ignores the enormous tax advantages.
Most people today will likely live well beyond age 59½. Many will spend two or three decades in retirement. Even if somebody retires early, they’ll still need assets later in life.
That’s why ignoring retirement accounts at age 30 often isn’t wise. You could end up giving away 30 or 40 years of tax-advantaged compounding.
It also isn’t an all-or-nothing decision. We can use taxable brokerage accounts, Roth IRAs and 401(k)s together. Each account serves a different purpose.
Retirement accounts also provide rebalancing flexibility that taxable accounts don’t.
Inside a Traditional or Roth IRA, investors can rebalance portfolios without triggering capital gains taxes. Somebody who wants less stock market exposure can freely sell shares and buy bonds, Treasurys or other funds without generating an immediate tax bill. That matters over long periods of time.
The other misconception is that retirement accounts are completely inaccessible until age 59½.
Let's talk about Rule 72(t), also called Substantially Equal Periodic Payments, or SEPP. This IRS rule allows penalty-free withdrawals before age 59½ if specific requirements are followed.
Using online 72(t) calculators, a $500,000 retirement account could potentially generate annual withdrawals of roughly $30,000 while avoiding the normal 10% early-withdrawal penalty:
The payments must continue for a required period and the IRS rules are strict. Still, the broader point remains: There are legal ways to access retirement funds earlier than many people realize.
The Rule of 55 is another example.
If you leave your employer during or after the year you turn 55, you can often withdraw money from that employer’s 401(k) without the normal 10% penalty. Again, the money is not completely locked away until 60.
Roth IRAs may also be flexible. Contributions can be withdrawn anytime tax- and penalty-free because taxes were already paid before the money went into the account.
That doesn’t mean people should tap retirement accounts early. But accessibility is very different from impossibility.
Roth IRAs also happen to be among the most powerful wealth building tools available.
Qualified withdrawals are tax-free. Dividends compound without yearly tax bills. Investors can buy and sell investments inside the account without triggering taxable events.
You may remember a famous example about Peter Thiel. According to reporting by ProPublica, Thiel reportedly grew a Roth IRA from $2,000 to more than $5 billion between 1999 and now. He turns 59½ in 2027, meaning those withdrawals could potentially be tax-free. Imagine if he had decided to skip retirement accounts because he wanted to “live now.”
Employer matches are another point often ignored online. Skipping a 401(k) match can be one of the costliest financial mistakes people make.
Suppose an employer offers a dollar-for-dollar match on the first 3% of salary contributed to a 401(k). Before the investments even grow, that’s effectively an immediate 100% return.
Very few opportunities offer that kind of risk-adjusted benefit.
In fact, somebody could theoretically contribute, collect the employer match, later withdraw the money, pay ordinary income taxes plus the 10% penalty, and still potentially come out ahead versus investing only through a taxable brokerage account with no match.
The tax advantages extend beyond employer matches.
Inside retirement accounts:
Compare that with a taxable brokerage account, where dividends may create yearly tax bills and selling appreciated shares can trigger capital gains taxes.
Retirement accounts can also create opportunities for tax arbitrage.
Somebody contributing while in the 22% or 24% marginal federal tax bracket today might eventually withdraw money while in the 10% or 12% bracket during retirement.
State taxes can widen the advantage even more. Some states provide tax deductions on retirement contributions while later taxing retirement withdrawals lightly or not at all.
Early retirees often use Roth conversion ladders as well.
The process generally works like this:
Like Rule 72(t), there are strict rules involved. But these strategies exist because retirement accounts were never designed to be prison cells.
The larger point is that retirement planning should involve multiple tools working together. Taxable brokerage accounts provide flexibility. Roth IRAs provide tax-free growth. Traditional retirement accounts can reduce taxes during high-earning years.
None of these accounts are perfect by themselves. Together, however, they can create an extremely efficient system for building long-term wealth.
That’s why describing retirement accounts as “paper wealth” misses the bigger picture.
Don’t Push It
ArticleJonathan Clements | Apr 11, 2025
There is no such thing as a tax loophole, but here they are anyway
R Quinn | May 17, 2026
- Tax planning opportunities (whether you call them a loophole is semantic) when there is a difference in tax rates across time periods (IRA vs taxable account) / types of income (income, dividends, gains, etc.) / jurisdiction (MA vs. FL) / object of tax (married vs. single) / other factors. Within each cut, effective tax planning seeks to move money from a category with a higher tax rate to one with a lower tax rate.
- We create a mess (and opportunities for tax planning by creating the above wedges) when we comingle social / economic policy with tax policy. A progressive tax rate is a simple example ... it implicitly assumes that richer people ought to pay more. Likewise, why seek to favor investments via a lower rate on LT capital gains rate? Why promote marriage with a higher slab for married filing jointly versus two people living together and filing as individuals? In my view, every attempt to alter behavior via tax policy has unintended consequences which has created the "tax planning" industry.
Having said this, I think divorcing the social / economic and tax policy is not that easy or straightforward. So, I think we are stuck in this mess for the long haul. And, as a rational person, it makes sense to tax plan as much as possible."Country Club Venture Capital
Mark Crothers | May 17, 2026
Resilient Investing
ArticleAdam M. Grossman | May 16, 2026
The Art of Spending Money
Jeff Peck | May 17, 2026
Quinns visit to Mar-a-Lago
R Quinn | Feb 14, 2025
Take a Look In the Mirror
Dan Smith | May 16, 2026
Help for divorcing daughter
dkkmc@aol.com | May 13, 2026
Best method for buying home for permanently disabled daughter (SSI and ABLE account)
Dianne Baumert-Moyik | May 13, 2026