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No, you don't end up paying 35%. Part of the advantages of a 401k come from distributing dollars being taxed at a high marginal rate to another year when they a
by uiri 10y ago
No, you don't end up paying 35%. Part of the advantages of a 401k come from distributing dollars being taxed at a high marginal rate to another year when they are taxed at a lower marginal rate.
- refurb 10y agoIt all depends. Sure, if you put almost nothing in a 401k, then when you pull it out, you'd be in a lower margin tax bracket (and living on very little money). But if you put a lot in, the fact you HAVE to start taking money out at a certain again AND it all gets taxed before you die means you pretty much end up paying the taxes anyways (or more if rates have gone up).
- zo1 10y agoIt's slightly different here, but effectively the same. Individuals get sold on the idea of "tax-back" from the taxation authority at the end of the year... They get bombarded by financial consultants that tell them they have to put up to 30% of their post-tax earnings into 401k-type accounts because they are "maximizing" their "tax-benefits". A lot of them even have no idea that they will be taxed anyways when they withdraw.
- 1anh2kqowg 10y agoWhich, not coincidentally, is also what the companies stashing profits overseas hope to accomplish through future changes in the tax law.