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Traditional 401(k) contributions save you money on your taxes now. The amount you contribute from your paychecks as Tradiditional 401(k) contributions reduce your federal tax bracket and liability right now. Traditional 401(k) contributions may be a good fit for people who 1) :
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Roth “After-Tax” Contributions
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Roth 401(k) contributions save you money on your taxes when you retire and start withdrawing the retirement funds. The amount you contribute from your paychecks as Roth 401(k) contributions do NOT reduce your federal tax bracket and liabilitynow. However, when you withdraw the funds in retirement you do not have to pay Federal taxes on the Roth amounts you contributed to the 401(k) plus you don't have to pay Federal taxes on any interest you withdraw/earned from those Roth contributions. Roth 401(k) contributions may be a good fit for people :
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Roth tax savings do not apply to the employer match and interest earned on the match. |
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