Question

Which of the following is a true statement about a 401k?
(1 point)
Responses

Contributions are not taxed until the employee retires.
Contributions are not taxed until the employee retires.

Employers are required to match employee contributions dollar for dollar.
Employers are required to match employee contributions dollar for dollar.

Employers deposit the money directly into the employee’s bank account.
Employers deposit the money directly into the employee’s bank account.

There is a financial benefit for withdrawing the money before retirement.
There is a financial benefit for withdrawing the money before retirement.

Answer 1

"Contributions are not taxed until the employee retires."

Explanation: Traditional 401(k) contributions are made pre-tax and grow tax-deferred; taxes are paid when withdrawals are made in retirement. (Employer matching is not mandatory, deposits go into the retirement account not your bank, and early withdrawals normally incur taxes and penalties.)