Question

Which of the following is not a special tax treatment given to those who contribute to a 401(k) or 403(b) plan? 1) Tax-free contributions 2) Tax-free growth 3) Tax-free withdrawals before the age of 59¬Ω 4) Tax-deferred withdrawals after the age of 59¬Ω

Answer 1

The correct answer is Tax-free withdrawals before the age of 59¬Ω.

Step-by-step explanation:

The correct answer is Tax-free withdrawals before the age of 59¬Ω. This option is not a special tax treatment given to those who contribute to a 401(k) or 403(b) plan. Let's break down the other options:

1. Tax-free contributions: When you contribute to a 401(k) or 403(b) plan, the money you contribute is not taxed.
2. Tax-free growth: The money in your 401(k) or 403(b) plan can grow tax-free, meaning you don't have to pay taxes on any investment gains or income generated within the plan.
3. Tax-free withdrawals before the age of 59¬Ω: This is not a special tax treatment. If you withdraw money from a 401(k) or 403(b) plan before the age of 59¬Ω, you may be subject to a penalty and taxes on the amount withdrawn.
4. Tax-deferred withdrawals after the age of 59¬Ω: When you withdraw money from a 401(k) or 403(b) plan after the age of 59¬Ω, you may be subject to taxes on the amount withdrawn, but you won't have to pay any penalties.

Overall, options 1, 2, and 4 are all special tax treatments given to those who contribute to a 401(k) or 403(b) plan, while option 3 is not.