TAXING QUESTIONS

September 16, 2008
Michael Sheehan

Physician's Money Digest, April15 2003, Volume 10, Issue 7

Tip

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.