[rwrcpa1]

The new limits on 401(K)s go up to $40,000 and 25% of one's income. That means that anyone making $160,000 or less may invest fully 25% of their pre-tax income in stocks, mutual funds, and bonds, and that money may be invested pre-tax. That's even before payroll taxes.

Sorry, 401(K), 403(b) and IRA contributions are all done AFTER payroll taxes are taken out, so are after tax as far as payroll taxes are concerned. But you are right that they are BEFORE income taxes.

[sitetest]

Dear rwrcpa1,

I don't know about individual IRAs, but with my SEP IRA, it was pre-payroll tax money that went into the accounts. I'm in the middle of setting up a 401(K) to replace the old SEP, and I'd have to double check, but I believe that through the "salary reduction," and with the employer contribution, both are pre-payroll tax.


sitetest