401K

[Betsy]

I will be able to quailfy for our 401K soon. I have to pre-enroll now. I can put any where from 1% to 80% of pay into it. The co. will match every dollor up to 5%. My choice is before taxes or after taxes or I could do both. When I retire and cash out I won't have to pay any taxes if I pick the after taxes option? or is this gonna be double taxed?

[conj]

should not be double dipped - but READ what they sent.

before or after taxes is largely a function of whether you think your tax rate will increase or decrease from what it is now when you retire...

[inogenius]

should not be double dipped - but READ what they sent.

before or after taxes is largely a function of whether you think your tax rate will increase or decrease from what it is now when you retire...
You can also slightly manipulate your income, resulting in lower tax rates. For example, if you make $32,000 a year, you could contribute more to your 401k so you're taxed in the lower tax bracket.

Would it effect anything regarding Social Security or Medicare?

[kranky]

Sounds like they are giving you the choice of a traditional 401k or a Roth 401k.

If you choose traditional ("before taxes"), then whatever you put into the 401k is not part of your federal taxable income - no income tax on what you contribute now. The money is subject to Social Security and Medicare tax. When you withdraw the money, you will pay income tax on your contributions and your investment gains.

If you choose the Roth 401k ("after taxes"), you pay income tax on the money you put in now. When you withdraw from your account, none of the money is taxed, even the investment gains. (in general).

If you're relatively young, the "after-taxes" option is probably best for you.