3 Great Reasons to Consider After-Tax Contributions to a 401(k)
The 401(k) has evolved over the past few decades, offering flexibility in the way American workers can save for retirement. More companies are offering their workers more than one option on how to use these accounts, and if you are one of the lucky workers who has a choice beyond the usual pretax contribution, you should take a hard look at how you could benefit most.
When given a choice, the majority of American workers opt for pretax contributions, which lower their federal income tax bill in the year they're made. And although the tax incentive for pretax contributions is a clear benefit no one can discount, it could make more financial sense to take advantage of after-tax contributions if you are among these three types of people:
- Those who are in need of an emergency savings buffer.
- Those who are high-income earners.
- Those whose incomes are volatile.
We will go into detail about each of those three situations,
