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To: Yo-Yo
401K withdrawals are treated as ordinary income

Traditional 401K...because you didnt pay tax on the money that went in.

Roth 401K withdrawals are tax free because you already paid the tax on the money that went in.

If you dont want to get into this trap, contribute only to Roths. If you are contributing to traditionals, stop and start contributing to Roths. If you have traditionals accumulated, talk to a good adviser about a plan that allows you to convert to Roth with the least tax implication. Over the long haul, the difference of taxes paid in retirement can be in the millions.

47 posted on 12/03/2021 8:04:56 AM PST by Magnum44 (...against all enemies, foreign and domestic...)
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To: Magnum44
If you dont want to get into this trap, contribute only to Roths. If you are contributing to traditionals, stop and start contributing to Roths.

Many corporations only offer matching-contribution 401Ks as retirement plans.

Can you convert a corporate retirement 401k to a Roth IRA? The corporation certainly isn't going to contribute to the Roth for you.

65 posted on 12/03/2021 8:33:17 AM PST by Yo-Yo (is the /sarc tag really necessary?)
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