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Part: 2 Savings > Saving Pre-Tax or After-Tax—Does It Really Matter? - Pg. 65

65 Chapter 6. Saving Pre-Tax or After-Tax-- Does It Really Matter? In This Chapter · What's the difference between pre-tax and after-tax? · Understand which option is right for you · Tax Avoidance versus Tax Evasion "If I can't get it out, I won't put it in! I need access to my money ... always." Believe it or not, comments such as these are a big reason why some employers offer their employees a chance to save on an after-tax basis. About 30 percent of the companies who sponsor 401(k) plans allow both pre-tax and after-tax contributions. Most of these companies are large, so if you work for a small employer (under 500 employees) don't get upset if there's no after-tax savings allowed. The big question is should you contribute after-tax? Let's see. Understanding After-Tax Contribution Remember from our earlier chapters that a big advantage to 401(k)s is saving on income taxes. When you contribute to a 401(k) on a pre-tax basis (before taxes are deducted), your contributions are not subject to income taxes, federal or state (except in Pennsylvania, that is). And you're saving these tax dollars today. Our Advice