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The 401K money comes right off the top and is not taxed now. It is taxed years later when you are withdrawing money. Do either or both of your 401K plans offer Roth 401K contributions? Consider where you think taxes will be in the future. When you retire and start to withdraw the 401K you will be taxed at ordinary income tax rates. Roth 401K withdrawals are tax free, based on current laws.
Your individual situation will dictate which approach is better for you. You Salaries, Expenses, Other income and investments will all play a part in this ever changing game of LIFE.

If you did a split and put some money in 401K and some in Roth 401K you would be saving the same 39K for this year. Just the taxes change.


One of the keys to using a deductible 401k is that you can invest more money today. For example, if the OP and his wife maxes their deductible 401k contributions at $39,000 and are in the 25% marginal rate, they will save $9750 in federal income taxes. If they are eligible to contribute to a Roth IRA, they can contribute that $9750 in tax savings to Roth IRAs which would put them at 81% of their $12,000 in total they can contribute.

PSU
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