Question

In an employer-sponsored retirement plan, interest, dividends, and capital gains earned from the funds invested in the plan are taxed​

a) At a lower rate
b) Tax-free
c) At the employee's tax rate
d) Only upon withdrawal

Answer 1

In an employer-sponsored retirement plan, interest, dividends, and capital gains earned from the funds invested in the plan are tax-deferred and only taxed upon withdrawal.

Step-by-step explanation:

In an employer-sponsored retirement plan, interest, dividends, and capital gains earned from the funds invested in the plan are tax-deferred. This means that they are not taxed at the time the earnings are made, but instead are taxed only upon withdrawal. This allows the investments to grow without being hindered by taxes, potentially resulting in more savings for retirement.