The Ocho Solo 401k comes with both a pre-tax Traditional account and a post-tax Roth account.

When you’re contributing as an employee, you get to choose whether you want it to go towards your pre-tax account or post-tax account. You can also choose to contribute some money to pre-tax and the rest to Roth.

When you’re contributing as an employer, you can only contribute as pre-tax.

Pre-tax (traditional)

With a pre-tax contribution, you’re choosing to get a tax break now rather than later, since contributions to a pre-tax account get deducted from your taxable income. For example, if you made $60,000 this year and chose to contribute $20,000 to a pre-tax account, your new taxable income is now $40,000. Withdrawals from your account in retirement will be taxed as regular income.

Post-tax (Roth)

With a post-tax contribution, you’re choosing to pay taxes now in return for tax-free withdrawals in retirement. If you made $60,000 this year and choose to contribute $20,000 to a Roth account, your taxable income is still the full $60,000. Any withdrawals made in retirement will be completely tax-free.

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