ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A tax-sheltered annuity is a type of investment vehicle that lets an employee make pretax contributions into a retirement account from income. Because the contributions are pretax, the Internal Revenue Service (IRS) does not tax the contributions and related benefits until the employee withdraws them from the plan.

Detailed explanation-2: -A traditional IRA is a way to save for retirement that gives you tax advantages. Generally, amounts in your traditional IRA (including earnings and gains) are not taxed until you take a distribution (withdrawal) from your IRA.

Detailed explanation-3: -Qualified medical savings plans, qualified retirement accounts, tax-exempt municipal bonds, real estate investments and annuities are all examples of tax-sheltered investments.

Detailed explanation-4: -With a Roth IRA, you contribute after-tax dollars, your money grows tax-free, and you can generally make tax-and penalty-free withdrawals after age 59½. With a Traditional IRA, you contribute pre-or after-tax dollars, your money grows tax-deferred, and withdrawals are taxed as current income after age 59½.

Detailed explanation-5: -A tax shelter is a legal way of investing in certain plans or schemes that reduce the overall taxable income of the taxpayers and therefore save the taxes paid to the state or federal governments.