It's generally better to contribute pre-tax (Traditional) if you're in a high tax bracket now and expect a lower one in retirement, getting an immediate deduction; and post-tax (Roth) if you're younger, in a lower bracket, and expect to be in a higher bracket later, as Roth withdrawals are tax-free. For those in the middle, mixing both or choosing based on future tax uncertainty (Roth) or immediate tax relief (pre-tax) is common, with Roth offering tax-free growth and no RMDs.
In general, when you are young and not in a higher tax bracket, you want to do post tax Roth accounts. Then somewhere around the middle to the end of your earning career you want to do pre-tax Traditional to lessen your immediate tax burden.
Do before tax, and as long as there's less than 30k going in to your super (plus rollover) you'll be better off. Anything going in to your super pre-tax is taxed at 15%, as opposed to your current income bracket (presumably higher than 45k).
Both pre-tax and post-tax benefits have their pros and cons. Generally, pre-tax deductions provide an immediate tax break but impact an employee's taxable income. Meanwhile, post-tax deductions don't provide immediate tax relief but aren't taxed when benefits are used in the future.
You enjoyed the ability to not pay taxes when you were saving but when it comes time to use your money, your contributions and all growth on your investments will be taxed as ordinary income. A large pre-tax retirement account will increase your Required Minimum Distribution (RMD) calculation.
Aim to save at least 15% of your pretax income each year for retirement (including employer contributions). This can be in a 401(k) or another retirement account. Contributing early can help you get the most out of your 401(K).
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You can contribute up to $7,000 to a Roth IRA for 2025, or $8,000 if you're age 50 or older, but this is limited by your income and must not exceed your taxable compensation for the year; for 2026, the limits increase to $7,500 (under 50) and $8,600 (50+). Eligibility phases out at higher Modified Adjusted Gross Incomes (MAGI), so you might contribute a reduced amount or nothing if your income is too high.
Calculating Tax Savings
To estimate the tax savings from pre-tax deductions, you'll need to consider your income tax bracket. As the deductions reduce your taxable income, you pay less tax at your marginal tax rate.
This after-tax 401(k) is a powerhouse for building your retirement savings. It lets you contribute money that you've already paid taxes on, so you can stash away even more for the future. The real magic happens as your contributions grow tax-free — just like a Roth IRA or Roth 401(k).
The combined total of your employer and other pre-tax super contributions cannot be more than $30,000 per financial year. Any amount in excess of this will be subject to extra tax. Depending what you decide to do with the excess contributions, this extra tax can be significantly high.
The 4% rule is a retirement guideline: withdraw 4% of your savings in the first year, then adjust that dollar amount for inflation annually, aiming to make your money last 30 years, but it doesn't account for taxes (Roth IRA withdrawals are tax-free, unlike Traditional IRAs) or varying market conditions, so it's a starting point, not a rigid rule, especially for early or very long retirements.
Having $100k in a 401(k) by age 40 is a solid start, but whether it's "good" depends on your salary and retirement goals, as experts often suggest having 2-3x your salary saved by then; if you earn $50k, you're ahead, but if you earn $80k+, you might need to accelerate savings, aiming for a 15% savings rate (including employer match) for a comfortable retirement.
Ghost employee fraud is a common form of internal occupational fraud where an employee, typically with payroll access, adds a non-existent employee (the “ghost”) to the company's payroll. The fraudster then collects the wages and/or benefits that were intended for the phantom employee.
Financial pundit Dave Ramsey's advice to pause 401(k) contributions while paying off debt forfeits employer match dollars and halts compounding growth. Staying invested through market downturns is a way to avoid missing the reward of the market rebounding.
The top ten financial mistakes most people make after retirement are: