Pre-tax Contribution

  

Categories: Accounting, Retirement

You're saving dough...pre-tax. (See: HSA). That is, before you get taxed on that last 6 grand of earnings you had last year, you are deferring your taxes on it by placing it in your 401(k) plan, thus making a pre-tax contribution to your retirement. You'll pay tax on that 401(k) when you take out the money, but for now, you get to compound it as an investment and then distribute it to yourself as presumably a lot more ordinary income.

See: Required Minimum Distribution.

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