Mark Gallegos

Let's just say I decided to contribute $20,000 to my 401k.

It would save you $5,000 in tax savings.

As it's growing, as it's earning dividends, interest, capital gains, and the value is going up, you're paying zero tax on any of that money in a given year.

In a way, you're using the government's money to help grow your retirement.

But they don't have the same level of income in that given year because now they're retired.

Maybe they have a little bit of investment income like interest dividends.

They got their social security.

But their income is substantially lower.

So maybe they're in the 10% tax bracket.

So that's the benefit.

When you pull the money out, your income is substantially lower because you're really not working anymore hypothetically.

Therefore, you're paying tax on this grown nest egg at a lower tax rate.

Let's just say an 18-year-old is working through school and they're making a part-time job and they decide, hey, I've got some earned income.

I'm going to contribute a bunch of it

to my Roth IRA that I just set up and then I start working and I got a Roth 401k and I'm maxing this Roth out along the way.

And now that money grows to $2 or $3 million by the time they're 65 years old.

When they decide to start taking that money out when they're retired, guess what?

They didn't get a deduction along the way for any of that because it's after tax money, but that amount of income coming out, $50,000, $100,000, whatever you're getting given here, tax-free.

The more options you have, the more you control you have in retirement, the better off you're going to be.

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