Explain the differences in how a 401k, a Roth IRA, and a traditional IRA are taxed.(1 point)
Responses
A 401k is taxed when the money is deposited; a Roth IRA allows tax deductions when the money is deposited and then the money is taxed when it is withdrawn; and a traditional IRA is taxed when the money is withdrawn.
A 401k allows tax deductions when the money is deposited and then the money is taxed when it is withdrawn; a Roth IRA is taxed when the money is deposited; and a traditional IRA is taxed when the money is withdrawn.
A 401k is taxed when the money is withdrawn; a Roth IRA is taxed when the money is deposited; and a traditional IRA allows tax deductions when the money is deposited and then the money is taxed when it is withdrawn.
A 401k is taxed when the money is withdrawn; a Roth IRA allows tax deductions when the money is deposited and then the money is taxed when it is withdrawn; and a traditional IRA is taxed when the money is deposited.
The correct response is:
A 401k allows tax deductions when the money is deposited and then the money is taxed when it is withdrawn; a Roth IRA is taxed when the money is deposited; and a traditional IRA allows tax deductions when the money is deposited and then the money is taxed when it is withdrawn.