The tax effect of a traditional retirement plan is to ________ taxes.

Question

Quizplus · Accepted Answer

The tax effect of a traditional retirement plan is to postpone taxes. This means that the individual does not pay taxes on the contributions made to the plan or the investment gains until they withdraw the money in retirement, at which point they will be taxed at their ordinary income tax rate. This allows the individual to potentially save money by deferring taxes until retirement, when they may be in a lower tax bracket. It is important to note that this is different from evading, erasing, or avoiding taxes, which are illegal or unethical actions.

The Tax Effect of a Traditional Retirement Plan Is to ________