Skip to main content
No. of Recommendations: 0
berniemuh,

1. 401K question: My employer says I can contribute from 1-15% of my total income up to a max. of $10,500 on a before-tax basis. I can also contribute up to $17,000 more on an after-tax basis. Why would I want to
contribute after-tax dollars to a 401K plan?


That's a decision you'll have to make for yourself. The way it usually works is:

(1) You can choose to contibute some funds, after tax, to your employer's savings plan

(2) You allocate those funds to various investment choices, probably in the same proportion as your before tax funds (i.e., that's probably just the way the plan will work).

(3) The earnings (we'll assume there are some) on those after-tax funds accumulate, tax-deferred, in your account.

(4) If you take early retirement or if you leave your employer and, let's say, want to roll your 401(k) into an IRA, those after-tax funds will come to you directly, tax-free (of course) to do with as you choose.

As with any decision, you'll need to run your own numbers.

Hope this helps somewhat...
Phooley
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.