Ramsey Everyday Millionaires Which Is Better for Retirement: Pre-Tax or After-Tax Contributions?
Jul 4, 2025
Dive into the intriguing debate of pre-tax versus after-tax contributions for retirement. Discover how these choices impact your future finances and the potential benefits of Roth accounts. Enjoy insights on tax-free withdrawals and the avoidance of required minimum distributions, making retirement planning feel less daunting. Learn how ordinary individuals have mastered their finances and built wealth by making informed decisions.
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Listener's Real-World Question
- Chris called to ask about the difference between pre-tax and after-tax retirement contributions instead of just Googling it.
- This analog approach in a digital world shows his genuine interest in human advice.
Traditional 401k Contributions Explained
- Traditional 401k and IRA contributions are pre-tax, meaning taxes are deferred until withdrawal.
- You get a tax deduction up front but pay income taxes later on withdrawals.
Roth Accounts Benefits
- Roth contributions are after-tax, so withdrawals in retirement are completely tax-free.
- Roth accounts avoid required minimum distributions and allow tax-free inheritance to heirs.