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First of all congratulate yourself for saving anything in your mid-twenties.

I don't think it is possible to put post-tax money into a 401K. I could be wrong. But your pre- vs. post- tax question is very valid for IRAs and other types of retirement plans (including 401K).

No hard and fast rules here -- and my info is incomplete.

"No-brainer": if you are eligible for 401K with matching, invest so that you get the most "free" (matching) money for your buck. For example, I once worked for CSC and they would match up to 3%, so I put in 3% of salary.

Arguments pro invest the money pre-tax (traditional IRA): you pay no taxes now, and earnings are tax-deferred. I like this approach, for the fatalistic reasons that I haven't yet paid taxes, the government is going to get its taxes some day, and no one can really tell what tax rates are going to be in 30 years, so it's a fool's errand to try and guess!!!

Arguments against investing pre-tax: you have to pay tax when you take out the money (Traditional IRA). There is a very good chance you will be in a higher bracket then, especially if you are "forced" to take withdrawls (this can happen).

Argument pro Roth IRA: You put in the money post-tax. You can raid the IRA (after 5 years) and get your original money out. At retirement, all the proceeds are tax free.

Argument for regular (taxable) investment account: pay your taxes up front. If you invest for capital gains (as opposed to interest/dividend), and hold for 5+ years, your maximum tax rate is 18%.

Complicated choices -- perhaps check with a financial planner.

Pedorrero, muddying the waters of truth since 1961.
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