I used to agree with you, but then I learned about 401k/roth conversion ladders. Basically, you can convert everything in a 401k to a roth (taxable event) and after 5 years you can withdraw all of that money penalty free and tax free (except the gains made in those 5 years). The key thing is that you want to strategically do the conversion when you have a very low income, for instance if you're already retired and living off of Roth contributions or taxable brokerage investments, so your only income for the year is the amount you convert. So basically, you just need enough funds to retire for 5 years before you can start withdrawing from the 401k->Roth.
I started doing this when I got a raise and realized pretty much half of my raise was going straight to taxes, whereas I could invest it all if I just upped my 401k contributions.
Very cool. I'm Canadian (which is why I mentioned RRSPs above), and I don't think an equivalent exists for us. Our alternatives to an RRSP (which is equivalent to your 401k) basically boil down to:
TFSA: you pay standard income tax up front, but no income tax on investment earnings. Annual contribution room is added. You can withdraw anytime and get the contribution room back.
FHSA: you do not pay income tax up front, you do not pay income tax on investment earnings. But you can only withdraw for a first home purchase (or convert into RRSP), and there's yearly and lifetime limits on contributions.
Non-registered investment account: you pay standard income tax up front. Investment earnings as capital gains are 50% of standard income tax. Withdraw anytime, no limits obviously.
With RRSPs: you do not pay income tax up front, but you pay standard income tax when you withdraw, and pay standard income tax on investment earnings (no capital gains rate). You cannot withdraw until retirement age.
Those are effectively your only four options here. When they're broken down that way.. does it make more sense?
Gotcha, your TFSA sounds pretty similar to a Roth. So if there was a way to convert RRSP into TFSA in the manner I described, you could potentially get access to that money earlier than 59.5 (or whatever your age limit is in Canada) if that rollover is able to count as a "contribution".