Q: Why contribute pre-tax to a 401k?
A: Pre-tax 401k contributions lower your current taxable income, reducing both federal and state income taxes. For example, contributing 5% on a $60,000 salary reduces taxable income by $3,000.
Q: Is there a cap on Social Security tax?
A: Yes, Social Security tax has a wage base limit (~$176,100 in 2026). Income above this cap is not subject to Social Security tax. Medicare tax has no cap.