Question

1.
Which of the following is a good reason to contribute to a retirement savings plan offered by an employer?

A.
An employer will usually allow you to pay reduced taxes and premium deductions each pay cycle.

B.
Your employer will take over contributions once you have continuously contributed for 5 years.

C.
You will receive stimulus funds from the federal government.

D.
The federal government allows your contribution to be tax deferred.

Answer 1

D. The federal government allows your contribution to be tax deferred — contributions to many employer retirement plans (like traditional 401(k)s) reduce your taxable income now and grow tax-deferred until withdrawal.