Tax Sheltered Annuities are categorized as PRE or POST?

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Multiple Choice

Tax Sheltered Annuities are categorized as PRE or POST?

Tax Sheltered Annuities use pretax contributions. When you contribute to a TSA, the money is taken from your pay before taxes are calculated, reducing your current taxable income, and it grows tax-deferred. You don’t pay taxes on the contributions or on the earnings until you withdraw in retirement, at which point withdrawals are taxed as ordinary income. So the correct categorization is PRE. The concept to keep in mind is that the tax benefit is up-front (contributions pretax) and taxes are paid later upon distribution. Roth or post-tax options do exist in some plans, but traditional TSAs are pretax.

Tax Sheltered Annuities use pretax contributions. When you contribute to a TSA, the money is taken from your pay before taxes are calculated, reducing your current taxable income, and it grows tax-deferred. You don’t pay taxes on the contributions or on the earnings until you withdraw in retirement, at which point withdrawals are taxed as ordinary income. So the correct categorization is PRE. The concept to keep in mind is that the tax benefit is up-front (contributions pretax) and taxes are paid later upon distribution. Roth or post-tax options do exist in some plans, but traditional TSAs are pretax.

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