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Before-Tax Contributions

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Before-tax contributions
The portion of an employee's salary contributed to a retirement plan before federal income taxes are deducted; this reduces the individual's gross income for federal tax purposes.

Before-Tax Contributions
Contributions made to a retirement plan with taxable withdrawals. That is, when one makes before-tax contributions to a retirement plan, one does not pay taxes on the contributions in the year they are made, but defers taxation until one begins to make withdrawals from the plan. One makes before-tax contributions to traditional IRAs and most 401(k)s. See also: After-tax contributions.


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To determine the benefits of one type of IRA in contrast to another, equal before-tax contributions into portfolios with the same returns must be considered.
A 401(k) plan allows employees to save and invest for their own retirement by making before-tax contributions through a cash or deferred compensation arrangement.
 
 
 
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