3 ms·
I must not understand your comment. 401k's are a pre-tax investment vehicle. Withdrawals are taxed as ordinary income. If inflation is 9% and gains are 10%,
by WalterGR 4y ago
I must not understand your comment. 401k's are a pre-tax investment vehicle. Withdrawals are taxed as ordinary income. If inflation is 9% and gains are 10%, all you're left with is 1%, which is what you'd pay taxes on when you withdraw.
(I'm using hand-wavy math here.)
- saltcured 4y agoTo be even more pedantic, you pay taxes on the 109% later when you withdraw during retirement...
- culopatin 4y agoYou pay taxes on the gains and what you put in when you take it out. Say you get 10% return with 9% inflation, You pay taxes on 10% gains even though your gains were truly 1%. Also gains could be from any investments. If you have a Roth that you manage or is managed, your tax payment vs gains is worse as well.