Many companies offer a 401(k) plan for employees’ retirement. Participants authorize a certain percentage of their before-tax salary to be deducted from their paycheck and put into a 401(k). By putting a percentage of your salary into a tax-deferred 401(k), you reduce the amount of pay subject to federal and state income tax. In addition, your employer may match a portion of every dollar you invest in the 401(k), up to acertain percentage or dollar amount.Group of answer choicesTrueFalse

Under a 401(k) plan, your employer makes nontaxable contributions to the plan for your benefit and reduces your salary by the same amounts.Group of answer choicesTrueFalse

What is a 401(k)?A.A retirement plan sponsored by a company to which employees can contribute part of their wagesB.A certificate issued by a bank to a person who has deposited money for a specific amount of timeC.A retirement fund that is designed for self-employed and other individualsD.A federal program that provides retirement income for the elderly and people with disabilitiesSUBMITarrow_backPREVIOUS

Which of the following is TRUE regarding 401k investments?Interest on investments is not tax deferred.Interest on investments is tax deferred.This retirement plan is rarely used.Employer can contribute part of employee's pay without consent.

"The idea i(of a tax-deferred investment) is that you'll be in a lower income tax bracket in retirement, so you'll enjoy more favorable tax rates at that time than you would during your peak earning years. By deferring taxes, you hope to reduce your overall tax bill on the funds in the account."If - as someone who might invest heavily during your working lifetime and have passive income greater than earned income at retirement - you are actually in a higher tax bracket in your "golden years" the tax benefit referenced above would go away.Group of answer choicesTrueFalse

What is the main benefit of investing in a 401k, IRA, or other retirement account?Multiple ChoiceThe employee receives additional tax deductions yearly.The earnings are tax free once withdrawn.These accounts always end up being worth more than the initial contributions.The employer matches the employee’s contributions.The earnings grow without being taxed yearly.