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Subject:  Avoid capital gains taxes in a 401k? Date:  4/24/2013  4:09 PM
Author:  pabloso Number:  288 of 294

I understand that 401k contributions are treated as deferred income so they will be taxed at my (presumably lower) tax rate when I am retired and over the age cutoff. I also understand that this taxation applies to all of the investment returns that accrue on my 401k contributions between now and my retirement.
But what happened to the capital gains (other investment) taxes that I would have to pay on investments that I made with my after-tax income? It seems that the 401k is a way to avoid paying capital gains taxes and other investment taxes, since all I do is pay the income tax.
To illustrate what I am asking, assume that my current and retirement tax rates are both 10% so the deferred tax benefit is absent. Also assume that I have the same investment option inside and outside the 401k an