REattempt
Recycles dryer sheets
- Joined
- Feb 27, 2010
- Messages
- 293
I had a question come to me and I wasn't quite sure how to answer.
If your company doesn't have a matching program in the 401(k), does it still make sense to contribute?
Let's assume, for sake of argument that the individual will be in the 25% tax bracket in retirement and is in the 33% bracket now.
So I put a small table together with simple assumption and it seems the 401(k) still makes sense. (10K to put in or put in taxable, 4% return, buy and hold, liquidate after 10 years).
What am I missing?
If your company doesn't have a matching program in the 401(k), does it still make sense to contribute?
Let's assume, for sake of argument that the individual will be in the 25% tax bracket in retirement and is in the 33% bracket now.
So I put a small table together with simple assumption and it seems the 401(k) still makes sense. (10K to put in or put in taxable, 4% return, buy and hold, liquidate after 10 years).
What am I missing?
no 401(k) | 401(k) | |
Rate of Return | 1.04 | 1.04 |
Saved | 10,000 | 10,000 |
Fed Tax rate | 0.33 | 0 |
State Tax Rate | 0.05 | 0 |
Taxes Paid | 3800 | 0 |
Net Contribution | 6,200 | 10,000 |
Yr 1 | $6,448 | $10,400 |
Yr 2 | $6,706 | $10,816 |
Yr 3 | $6,974 | $11,249 |
Yr 4 | $7,253 | $11,699 |
Yr 5 | $7,543 | $12,167 |
Yr 6 | $7,845 | $12,653 |
Yr 7 | $8,159 | $13,159 |
Yr 8 | $8,485 | $13,686 |
Yr 9 | $8,825 | $14,233 |
Yr 10 (withdrawn) | $9,178 | $14,802 |
Fed Tax rate | 0.25 | 0.25 |
State Tax Rate | 0.05 | 0.05 |
Taxes Paid | $2,753 | $4,441 |
Net Income | $6,424 | $10,362 |
Total Taxes Paid | $6,553 | $4,441 |