Physician's Money DigestApril15 2003
Volume 10
Issue 7


If President Bush's plan to repealthe tax on dividends becomes law,are you better off buying a dividend-heavymutual fund for a taxableaccount or putting your money into atax-deferred 401(k) plan? The key tothe answer is that the cash you put ina 401(k) is pretax money. A $10,000contribution to a 401(k) is equivalentto putting about $7000 after taxesinto a dividend-rich mutual fund in ataxable account. Assuming an 8%average annual return, your accountafter 20 years will be more than$6000 richer in the 401(k). :Keep funding that 401(k) plan, especiallyif an employer matches all orpart of your contribution.

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