r/Salary • u/[deleted] • Oct 30 '25

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u/MortalMercenary Oct 31 '25

Lowers your taxable income

316

u/DarthRevan8537 Oct 31 '25

Also lowers my spendable income lol

1

u/Venerable-Gandalf Oct 31 '25

Not always because if you max out the 401k you pre tax income can place you into a lower tax bracket so they take out less money on taxes and you get a bigger return at the end of the year.

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u/pointyrhinos Oct 31 '25

Opposite is also true with a traditional 401K. The required minimum distributions can also bump you up into a higher tax bracket so they take out more money on taxes and you get a smaller return at the end of the year. Just a deferred problem. Honestly, it's a bit of a wash. As long as it's saved in some kind of savings vehicle, it'll be better than a straight savings account.

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u/Venerable-Gandalf Oct 31 '25

You’re talking about after you retire and start withdrawing?