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Question
Hope's contribution to her RETIREMENT plan... A. Is A Post-Tax Contribution On Which She Pays Federal Income Taxes B. Is Pre-Tax And Therefore Not Included In Federal Income Taxes C. Is A Contribution To Her Social Security D. Is Taxed At A Rate Of 15%

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Earl

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Answer

B. Is Pre-Tax And Therefore Not Included In Federal Income TaxesThis option correctly describes the typical tax treatment of contributions to most employer-sponsored retirement plans. The contribution is made before federal income taxes are calculated, thus reducing the employee's taxable income for the year.

Explanation

This question pertains to retirement plans and their tax implications, which falls under the domain of personal finance. To answer this question, we need to understand the typical characteristics of retirement plans, particularly in relation to taxation.Most common retirement plans, such as 401(k)s or Traditional IRAs, offer tax advantages. Contributions to these plans are typically made with pre-tax dollars, meaning the money is deducted from the employee's paycheck before income taxes are calculated. This reduces the employee's taxable income for the year, providing an immediate tax benefit.The key phrase in the question is "RETIREMENT plan" (in all caps), which typically refers to employer-sponsored plans like 401(k)s or similar tax-advantaged accounts. These plans usually allow for pre-tax contributions.It's important to note that while contributions are usually pre-tax, the funds will be taxed when withdrawn during retirement. This is different from post-tax contributions (like those made to a Roth IRA) or Social Security contributions.

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