The money a worker invests in a 401(k) retirement account reduces that worker's present taxable income.

Question

Quizplus · Accepted Answer

This statement is true. Contributions made to a traditional 401(k) account are generally made with pre-tax dollars, which means they are not subject to federal or state income taxes at the time they are made. This reduces the worker's taxable income for the year in which the contributions are made. However, taxes are eventually due on the money withdrawn from the account during retirement.

The Money a Worker Invests in a 401(k) Retirement Account