Pre-Tax Vs Post-Tax contributions to 401-K

I had two interesting Coaching sessions last week-One was a 23 year old woman and the other was a 52 year old woman. Let’s look at why I suggested the 23 year old start some pre-tax and some post-tax in her 401-K. The pre-tax saves her some taxes right now but I am positive taxes will rise dramatically in her lifetime and hence the encouragement for post-tax contributions. Her plan also allows her to take out her after-tax contributions once a year and take them to a brokerage account of her choice-pretty cool option. That’s another good reason for you to check your plan options. We are focusing on stocks and mutual funds that will give growth & income, you know I love cash flow. Please consider if some after-tax contributions might be appropriate for you. This goes against “conventional” wisdom but talk to ten retirees who have a ton of cash in pre-tax accounts and ask them why they are not enjoying some cash flow….You guessed it, Taxes! Please also consider Roth IRA’s-which are post- tax contributions, especially if you are twenty something-this can make a huge difference for you in later years and I will give you some powerful options in my next post. Enjoy the Weekend!

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