Final answer:
The statement is false; 'pretax' means that money is invested before any taxes are applied, not after. Contributions to plans like 401(k)s and IRAs are made with pretax dollars, meaning they are taken from income before taxes are deducted.
Step-by-step explanation:
The term 'pretax' refers to money that is taken out of an employee's paycheck before taxes are calculated and withheld. This means the original assertion that pretax means the government allows you to invest money after taxes are taken out is false. When contributions are made to savings plans like 401(k)s or Individual Retirement Accounts (IRAs), the money is invested pretax, which means it is deducted from your income before federal and state taxes are applied. As a result, these contributions can lower your taxable income, and taxes on them are deferred until the funds are withdrawn, typically in retirement. This system is designed to encourage long-term saving and investment by allowing the funds in accounts like IRAs and 401(k)s to grow tax-free until retirement.