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Re: 401k: Cash out to pay credit card debt?
You've got plenty of good advice here so I won't repeat it.
Just wanted to make sure you're clear regarding "taxable". Your Roth IRA contributions are paid with "after tax" dollars, meaning you deposit money from your take home pay after you have paid Federal, state, etc. taxes on it. This is in contrast with a 401(k) which you pay for with "before tax" dollars, which lowers the amount of your income that you have to pay income tax on.
So if you get $100 in income, and put nothing in a 401(k), you pay taxes on $100. If you get $100 in income, and put $10 in a 401(lk), you pay taxes on $90. In either situation, you can choose to spend some of your net income (take home pay) on a Roth IRA.
Sorry to repeat this if you already understood it, and I won't go into the fascinating details of what is taxable when you withdraw funds ...
Good luck!
Originally posted by neatdesign
Just wanted to make sure you're clear regarding "taxable". Your Roth IRA contributions are paid with "after tax" dollars, meaning you deposit money from your take home pay after you have paid Federal, state, etc. taxes on it. This is in contrast with a 401(k) which you pay for with "before tax" dollars, which lowers the amount of your income that you have to pay income tax on.
So if you get $100 in income, and put nothing in a 401(k), you pay taxes on $100. If you get $100 in income, and put $10 in a 401(lk), you pay taxes on $90. In either situation, you can choose to spend some of your net income (take home pay) on a Roth IRA.
Sorry to repeat this if you already understood it, and I won't go into the fascinating details of what is taxable when you withdraw funds ...
Good luck!
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