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.

Which statement describes an advantage of tax-deferred retirement savings?A.The tax burden on your savings is partly paid at the time you invest.B.You don't pay tax on your investment until you withdraw it.C.You earn extra interest on your savings.D.You pay all the tax when you invest so you don't owe tax when you withdraw it.

"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

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

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retirement account?Multiple ChoiceThe employee receives additional tax deductions yearly.The earnings are tax free once withdrawn.These accounts always end up being worth more than the initial contributions.The employer matches the employee’s contributions.The earnings grow without being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.

When comparing the 401k and the Traditional IRA, what benefit is sometimes offered by the employer to make the 401k a better choice?Multiple ChoiceSome employers will match the employee’s contributions in the 401k.There are no valid reasons to invest in a 401k compared to a Traditional IRA.The employer will often make your investment decisions for the employee, resulting in better growth potential.Money inside a 401k may be removed anytime without penalty.The earnings withdrawn from a 401k are not taxed.