ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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company plans that provide retirement income for their workers (401k)
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private retirement plan that allows people to save a certain amount of income per year tax-free. They pay taxes when money is taken out.
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private retirement account that allows people to save a certain amount of income per year. Money is taxed when deposited, but money taken out is tax-free.
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None of the above
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Detailed explanation-1: -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-2: -The three main types of IRAs are traditional IRAs, Roth IRAs and rollover IRAs. Traditional IRAs are funded with pretax dollars, while Roth IRA contributions are made after taxes. A rollover IRA is an IRA funded with money from a former employer-sponsored 401(k) that doesn’t incur early withdrawal penalties.
Detailed explanation-3: -A single filer with no employer-sponsored retirement plan can deduct the full amount of a traditional IRA contribution. 6 However, if you are covered by a retirement plan at work, then these income restrictions apply: A full deduction is available if your modified AGI is $68, 000 or less for 2022 ($73, 000 for 2023).
Detailed explanation-4: -With a Roth IRA, contributions are not tax-deductible, but earnings can grow tax-free, and qualified withdrawals are tax-and penalty-free.