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Contributing to a pre-tax 401(k) plan reduces your taxable income now, potentially lowering your current tax bill. Contributions to a post-tax 401(k) plan are made with after-tax dollars, but withdrawals in retirement are tax-free.

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What are the differences between contributing to a traditional 401k before tax vs a Roth 401k?

Contributing to a traditional 401k before tax means you don't pay taxes on the money you put in now, but you will pay taxes on the withdrawals in retirement. Contributing to a Roth 401k means you pay taxes on the money you put in now, but withdrawals in retirement are tax-free.


How does 401k contribution work and what are the benefits of contributing to a 401k plan?

A 401k contribution is money you set aside from your paycheck to save for retirement. This money is invested in stocks, bonds, and other assets to grow over time. The benefits of contributing to a 401k plan include tax advantages, employer matching contributions, and the opportunity for long-term growth of your savings for retirement.


What are the differences between contributing to a pretax 401k and an after tax 401k, and how do these choices impact my retirement savings?

Contributing to a pretax 401k means you don't pay taxes on the money you put in now, but you will pay taxes on it when you withdraw it in retirement. Contributing to an after-tax 401k means you pay taxes on the money now, but won't pay taxes on it when you withdraw it in retirement. The choice impacts your retirement savings by affecting when you pay taxes on the money and how much you ultimately have available for retirement.


What are the differences between contributing to a pre-tax 401k and a Roth 401k, and how do these options impact my retirement savings?

Contributing to a pre-tax 401k reduces your taxable income now, but you pay taxes on withdrawals in retirement. A Roth 401k is funded with after-tax money, so withdrawals in retirement are tax-free. The choice impacts your retirement savings by affecting when you pay taxes on the money and how much you ultimately keep.


How does a 401k work and what are the benefits of contributing to one?

A 401k is a retirement savings plan offered by employers. Employees can contribute a portion of their salary to the plan, which is invested in stocks, bonds, and other assets. The benefits of contributing to a 401k include tax advantages, employer matching contributions, and the potential for long-term growth of savings for retirement.

Related Questions

What are the differences between contributing to a traditional 401k before tax vs a Roth 401k?

Contributing to a traditional 401k before tax means you don't pay taxes on the money you put in now, but you will pay taxes on the withdrawals in retirement. Contributing to a Roth 401k means you pay taxes on the money you put in now, but withdrawals in retirement are tax-free.


How does 401k contribution work and what are the benefits of contributing to a 401k plan?

A 401k contribution is money you set aside from your paycheck to save for retirement. This money is invested in stocks, bonds, and other assets to grow over time. The benefits of contributing to a 401k plan include tax advantages, employer matching contributions, and the opportunity for long-term growth of your savings for retirement.


What are the differences between contributing to a pretax 401k and an after tax 401k, and how do these choices impact my retirement savings?

Contributing to a pretax 401k means you don't pay taxes on the money you put in now, but you will pay taxes on it when you withdraw it in retirement. Contributing to an after-tax 401k means you pay taxes on the money now, but won't pay taxes on it when you withdraw it in retirement. The choice impacts your retirement savings by affecting when you pay taxes on the money and how much you ultimately have available for retirement.


How does a 401k work and what are the benefits of contributing to one?

A 401k is a retirement savings plan offered by employers. Employees can contribute a portion of their salary to the plan, which is invested in stocks, bonds, and other assets. The benefits of contributing to a 401k include tax advantages, employer matching contributions, and the potential for long-term growth of savings for retirement.


What are the differences between contributing to a pre-tax 401k and a Roth 401k, and how do these options impact my retirement savings?

Contributing to a pre-tax 401k reduces your taxable income now, but you pay taxes on withdrawals in retirement. A Roth 401k is funded with after-tax money, so withdrawals in retirement are tax-free. The choice impacts your retirement savings by affecting when you pay taxes on the money and how much you ultimately keep.


What are the differences between investing in index funds and contributing to a 401k plan for retirement savings?

Investing in index funds involves buying a diversified portfolio of stocks or bonds that track a specific market index, providing broad market exposure. Contributing to a 401k plan involves setting aside a portion of your salary in a tax-advantaged retirement account, often with employer matching contributions. Index funds offer passive investing with lower fees, while a 401k plan allows for tax benefits and potential employer contributions.


What are the differences between contributing to a 401k pre-tax versus contributing to a Roth 401k?

Contributing to a traditional 401(k) is done with pre-tax money, meaning the amount you contribute is deducted from your taxable income for the year. This can lower your current tax bill. On the other hand, contributing to a Roth 401(k) is done with after-tax money, so you don't get a tax break now, but your withdrawals in retirement are tax-free.


What are the differences between 401k benefits and traditional IRAs?

The main difference between a traditional IRA and a 401K plan is in how they are obtained. A traditional IRA can only be obtained privately through your investment company or lending institution. A 401K plan is typically obtained through your employer; however, since 2002, self-employed individuals are allowed to obtain individual 401K plans.


What is the 2016 deadline for contributing to a 401k account?

The deadline for contributing to a 401k account for the year 2016 is typically December 31st of that year.


What are the differences between a post-tax 401k and a Roth 401k, and which one would be more beneficial for my retirement savings strategy?

A post-tax 401k involves contributing money that has already been taxed, while a Roth 401k involves contributing money that will be taxed later upon withdrawal. The choice between the two depends on your current tax bracket and future retirement income. If you expect to be in a higher tax bracket in retirement, a Roth 401k may be more beneficial. If you expect to be in a lower tax bracket, a post-tax 401k may be better. Consulting a financial advisor can help you make the best decision for your retirement savings strategy.


Is a self employed 401K really worth it?

A self-employed 401K is worth it as your receive numerous benefits from it, outside of those that you already have with a standard 401K. You can also put into the account a larger contributing sum than you would be able to working at a larger company.


Why do you have to be 21 to have a 401k?

You do not have to be 21 to have a 401k. In fact, you can start contributing to a 401k as soon as you start working, regardless of your age.