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.
None of the statements are true except for "Contributions are not taxed until the employee retires."
The true statement about a 401k is that contributions are not taxed until the employee retires.
The correct true statement about a 401k is:
Contributions are not taxed until the employee retires.
To arrive at this answer, we can eliminate the options one by one:
1. "Contributions are not taxed until the employee retires." - This statement matches the true statement about a 401k.
2. "Employers are required to match employee contributions dollar for dollar." - This is not necessarily true. While some employers may choose to match employee contributions, it is not a requirement.
3. "Employers deposit the money directly into the employee’s bank account." - This statement describes the process of direct deposit, which is a common method for employers to deliver paychecks or other compensation, but it does not specifically pertain to 401k contributions.
4. "There is a financial benefit for withdrawing the money before retirement." - This statement is false. Withdrawing money from a 401k before retirement typically results in penalties and taxes.
Therefore, the correct true statement is that contributions to a 401k are not taxed until the employee retires.