Question

6 which of the following is true about retirement contributions such as a 401k?

reduce taxable income
charged a service fee
increase taxable income
not allowed to be withdrawn

Explanation:

Define 401k contributions

A traditional 401(k) is a tax-advantaged Retirement Accounts option. Contributions are made pre-tax directly from your paycheck.

Analyze tax impact

Pre-tax contributions lower your current year's gross income. This directly reduces your overall taxable income.

Evaluate other options

Contributions do not increase taxable income. They are allowed to be withdrawn later, and they are not defined by a service fee.

Answer:

• Reduce taxable income (Correct answer)
• Charged a service fee
• Increase taxable income
• Not allowed to be withdrawn