The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Retirement Investing

URL:  http://boards.fool.com/sorry-for-the-confusion-i-used-to-contribute-10194252.aspx

Subject:  Re: Alternatives to a 401K Date:  6/1/1998  6:40 PM
Author:  lckrypel Number:  3539 of 75335

Sorry for the confusion.

I used to contribute $10,000 (15%) of my gross to a 401K plan. This reduced my tax liability while the contributions grew taxfree until withdrawal. My employer also contributed $4,000 (up to 4% of my gross until I hit the $10,000 limit).

Now I can contribute 6% of my aftertax earnings and my employer makes a contribution of up to 4% of my gross. Since this is aftertax it does not reduce my tax liability.

So, in comparison, if I contribute $10,000 to the 401K plan I save $2,800 in taxes (assuming the 28% tax bracket) but in the 403B plan I end up paying taxes on the $10,000 because the contribution to my 403B does not reduce my gross income.


Copyright 1996-2014 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us