Should I Invest Using Pre-Tax or Post-Tax Money?

by Adam on May 28, 2010

Today’s an exciting day for Magical Penny as it’s the launch of the very first Magical Penny Video!

Pre Tax and Post Tax Investing -Which is better?

In the video I outline the pros and cons of saving using Pre-tax and Post-tax money.

Pre-tax savings

Pre-tax savings means saving in a pension or 401k and involves your money being fed directly from your employer into a savings vehicle without paying any income tax -you pay tax only when you come to take it out once you retire according to tax tools such as a tax estimator.

Post-tax savings

Post-tax savings means saving with your money that you ‘bring home’ -the money you find in your paycheck. If you then invest that in a savings vehicle like an ISA (or a Roth IRA if you’re in the US) then you get to keep all the gains and don’t have to pay any more tax.

My Conclusion?

…you’ll have to watch the video for the details but suffice to say it’s a typical personal finance blogger answer I’m afraid: You need to do a bit of both!

Your Thoughts?

From my perspective the video was a fun experiment but what do you think? Do you think I should do more videos or stick to writing? I’d love to hear from you -both on your perspective on pre and post-tax saving, and on what you think of the video format!

Production Notes

Yes I know I look a bit squashed in the video -the mp4 conversion to a format compatible with Windows Movie-Maker was not pretty (currently my only editing tool) -but for my first ever attempt at making a video I’m pretty proud of the result.

Have a great weekend all -I certainly intend to as I celebrate my 24th birthday 🙂

{ 13 comments… read them below or add one }


Hi Adam! Great Video. Keep up the good work


Cheers Alban. Will do! 🙂

Len Penzo

Well done, Adam! That was a VERY polished performance for your first video. 🙂

I am officially adding you to my list of favorite bloggers from across the pond!

All the best,

Len Penzo dot Com


Thanks Len, appreciate the kind words! 🙂

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I’ve always thought pre-tax for sure, but now I’m not so sure. There are pro’s and cons of both sides. Very nice post for sure!



I like post-tax because I know where I stand and that all the gains will be tax-free (hopefully lots of gain of the years)


Great job!! Adam is it nice to see young people teaching financial literacy. Keep up the good work.


Thanks Patricia! The thing about youth is that it disappears quickly so it definitely makes sense to take advantage of time while it’s still there! 🙂

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Pre-tax savings provided by employer retirement accounts help you a lot to start saving for retirement even if your finances are tight.


And definitely if the employer is offering ‘free’ money to contribute!

Sam | Freelance Birmingham Web Designer

I’m a genuine novice when it comes to financial stuff like this, but I found the video pretty easy to follow and gave me some food for thought.


Thanks Sam, glad you found it helpful. If you have any other questions I’d be happy to share my thoughts -just email me at adam AT


Video isn’t loading for me – has it gone? Or is it just temporary?

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