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Author: lckrypel Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75777  
Subject: Re: Alternatives to a 401K Date: 6/1/1998 6:40 PM
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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.

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