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: -Roth IRAs. A Roth IRA differs from a traditional IRA in several ways. Contributions to a Roth IRA aren’t deductible (and you don’t report the contributions on your tax return), but qualified distributions or distributions that are a return of contributions aren’t subject to tax.
Detailed explanation-2: -Roth IRA contributions aren’t taxed because the contributions you make to them are usually made with after-tax money, and you can’t deduct them. Earnings in a Roth account can be tax-free rather than tax-deferred.
Detailed explanation-3: -After-Tax Contributions and Roth IRAs The annual contribution limit for both Roth and traditional IRAs is $6, 000 for tax year 2022 (increasing to $6, 500 in 2023).
Detailed explanation-4: -A Roth IRA is an Individual Retirement Account to which you contribute after-tax dollars. While there are no current-year tax benefits, your contributions and earnings can grow tax-free, and you can withdraw them tax-free and penalty free after age 59½ and once the account has been open for five years.