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Reply to "Anyone NOT maxing out your 401(k) even though you're making decent money?"
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[quote=Anonymous][quote=Anonymous]"if you believe that you will be in the same tax bracket at retirement as you are now, there is no tax advantage from investing with pre-tax money instead of post-tax money. If you believe (say) that you will pay 28% of your marginal income dollar in taxes when retired, versus 35% now, then the tax advantage from using pre-tax money to invest is 7%. " NP. You're a little bit off on this one. Even if you expect to be in the exact same [marginal] "bracket" in your retirement, you still need to compare the fact that your tax-deferred 401(k) savings now are likely avoiding the higher marginal rate now, but when you take a distribution in retirement, it's the lower EFFECTIVE rate that matters. So it might be 35% now and 35% then for your bracket, but it's whatever amount off the TOP now (taxed higher), and later it's spread across the whole ladder, including across the much lower rates. Make sense, or no?[/quote] PP here. This is a good point. [/quote]
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