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Just for an example, say you're in the 20% tax bracket now. Contribute 60K to a traditional IRA, and after 30 years at 4% interest, it grows to 198K. If you contribute to a Roth, then that 60K becomes 48K after taxes, and after 30 years you only have 149K. Of course you can use a financial or spreadsheet, and run endless scenarios, plugging in whatever ...


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Your assumptions are mostly right, but you are missing some critical points: If you contribute post-tax, you will have less money to contribute, so you will end up with a lot less in the account. In other words, 1.5 mio post-tax is certainly better than 1.5 mil pre-tax, but to have 1.5 mil post-tax, you need to originally have maybe 2 mio. At one point in ...


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Well, my answer is yes. Let me prove why, when you contribute to 401k its tax free, and when your employer matches its tax free, plus you still pay income tax through withholding. Now this is where it gets funny. When you retire and pull out your 401k it gets pulled out as ordinary income, which gets taxed at the normal tax rate as though you worked for ...


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No one can contribute to a 401(k) that was established by a previous employer-- not you and not one of your clients. (Well, depending on how you might define "contribute", if you have a rare 401(k) that lets you take out a loan and pay it back after separation, I suppose you might argue that the interest you're paying counts..) As a sole proprietor, your ...


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Or, alternatively, do I need to take the client fee as income and then deduct it somehow? Yes, but note that you can't contribute to a 401(k) after you are no longer employed by the company - you will need to roll that money into an IRA. After that, then you would count the income as income, then deduct the IRA contributions (subject to annual ...


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No, your clients cannot contribute directly to your retirement accounts. The taxes are figured out every year when you file your income tax return. There's no advantage to having a client pay into a retirement account, even if it were possible. So, yes, you take the client fees as income, then contribute to your retirement accounts as you see fit and as ...


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Say, when we get to the age of 65 or 67, and retire, and we take out most of the 401(k) and IRA money, if luckily they can grow to $1,000,000 to buy a second house, all at once, will we be subject to a huge amount of tax, such as $300,000? All the funds in the traditional 401(k) and traditional IRA are pre-tax. This also includes any matching funds ...


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Once you have gotten the maximum matching on the 401k, further contributions to the 401k are just like deductible IRA contributions. They reduce your taxable income this year and are not taxed until the money comes out. You may even roll them over to an IRA in the future if you change jobs. The advantage over the nondeductible IRA is the money that would ...


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You need to determine how much you need to put into your retirement accounts this year, and then decide on the best split that gets you to your goals. Should I be maximizing my traditional/Roth 401k contributions before I even consider a traditional IRA? You should put enough money into the 401(k) to get the maximum company match. Then decide if you ...


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There are at least two reasons to contribute to an IRA: A backdoor Roth IRA. You can still get your money into a Roth IRA to grow tax free. However, there may be some pitfalls. Deferred tax on growth. If you're deciding between traditional IRA vs. taxable account, the benefit is that the growth (dividends, interest, capital gains) aren't taxed until ...


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No. For 2020 the $19,500 contribution limit is how much you, the employee, can elect to defer into your 401k from your wages. If you're 50 or older, you can defer an additional $6,500 for a personal total of $26,000. Your employer can make contributions to your account such that your combined contributions do not exceed $57,000 (or $63,500 if you're 50+.) ...


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There are basically 3 rules for 401k contribution limits (using 2020 numbers): The max an employee can defer from their paycheck is $19,500. If the employee is over 50 years old they can defer $6,500 more than that, or $26,000 total. The total of employee amount plus employer paid amount (either from matching or just straight paid without a matching ...


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