Question

If your money is in a pretax retirement plan, you will pay taxes on it when you cash it out

a. true
b. false

Answer 1

True, you will pay taxes on money withdrawn from a pretax retirement plan, as these are tax-deferred accounts where taxes are paid upon withdrawal.

Step-by-step explanation:

If your money is in a pretax retirement plan, such as a 401(k) or a traditional IRA, you will indeed pay taxes on it when you withdraw funds during retirement. This is because these plans are tax-deferred, meaning that you do not pay any taxes on the contributions or the investment gains until you cash out. In contrast, pensions and defined benefits retirement plans, which were more common in the past, have largely been replaced by these types of defined contribution plans.

Answer 2

Yes, you will pay taxes on a pre-tax retirement plan like a 401(k) or traditional IRA when you cash out, since these plans are tax-deferred.

Step-by-step explanation:

If your money is in a pre-tax retirement plan such as a 401(k) or traditional IRA, the answer is true, you will pay taxes on it when you cash it out. These plans are tax-deferred, meaning that you do not pay any taxes on the money you contribute or the growth of those funds while they remain in the account. However, you will be subject to income tax on the money when you withdraw it during retirement.