What are the tax implications of a 401(k)?
An example of an AI chatbot conversation about tax implications of 401(k) plans.
What are the tax implications of contributing to a 401(k)?
Contributions to a 401(k) are made pre-tax, which means they reduce your taxable income for the year you contribute.
What happens when I withdraw money from my 401(k)?
Withdrawals from a 401(k) are generally taxed as ordinary income, and if you're under 59½, you may face a 10% penalty.
Are there any tax benefits when I retire and start taking distributions?
Yes, when you retire and start taking distributions, you may be in a lower tax bracket, which can reduce your overall tax burden.
What about employer matching contributions?
Employer matching contributions are also tax-deferred until you withdraw them, which can significantly boost your retirement savings.
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