MYM Mailbag # 3
Do you have any questions you would like MYM to answer? leave a comment or send us an email.
I participate in my companies 401(k) and I am confused if I will pay taxes on the entire amount I withdrawal when I retire, or just the earnings? – Jason
The entire amount, including earnings, will be taxed when you start withdrawing money from your 401(k) during retirement. Unless you are invested in a Roth account, which would then mean you would get the full amount because you are paying taxes on the money before it goes into the account and earnings and contributions grow tax-free. The best way to think about tax-sheltered accounts is to remember that the money HAS to be taxed once. It’s either going to be taxed when you withdrawal the money (Traditional) or when you put in the money in (Roth).
I’m not sure if you guy’s answer reader’s questions, but I’m wondering if you can help me with a tax question. My company offers a pre-tax option on our commuter expenses as well as certain health care expenses. I don’t participate in the program because it seems like such a small amount, that won’t really help me come tax time. Should I enroll in these benefits? – Lauren
We love to try to answer questions, thanks for asking one! You should definitely participate in your company’s pre-tax commuter and health care program. You are right, it does seem like much, but you may be surprised at the total year’s savings. Let’s say your commuting costs are $130/month and your eligible health care costs (i.e. Copayments, prescriptions, childcare, etc.) are $100/month. Your total yearly expenses would be $2,760.00. If you participate in the pre-tax program, you would save approximately $690 if your tax bracket is 25% (Take your yearly expenses times your current tax bracket). Remember, these are costs you are going to HAVE to pay anyways, so you might as well save on them. Who knows, participating could barely lower you into a new tax bracket too!
Are we going to get another stimulus check? – Anonymous
This is a good question. There is a lot of confusion out there with the talks of another stimulus package. While it is true that Congress is considering a lame-duck session to hammer out another stimulus check, it is not true you will be getting another check. This round of handouts is intended to boost our nation’s infrastructure with hopes of boosting our economy. Although the bill has not been written, I’m guessing there will be plenty of money for small businesses to get off the ground as well. We will keep you posted after the elections as to what a new stimulus package would mean for you.
Who are you guy’s going to vote for in the presidential election? – Anonymous
Ben and I do not agree on everything when it comes to the election, but we plan to release our separate views before the election. We hope you find them beneficial. $
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