Maximizing Tax Savings through 401k Contributions

Maximizing tax savings through 401k contributions is beneficial when the combined marginal state and federal tax rate is over 30%. By contributing to a 401k, individuals can potentially save 30% on taxes, resulting in a 30% imputed rate of return. Planning for financial independence by diversifying savings across different pots can help lower the tax rate in the future, making pre-tax contributions a sensible choice. Although personal tax situations may vary, maximizing 401k contributions in a pre-tax manner while also utilizing backdoor Roth contributions can provide a balanced approach to tax savings and wealth building.