| The advantages are |
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Reduces taxable income from federal taxes (and state taxes).
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Earnings on contributions accumulate tax free until distributed.
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Depending on income level, it makes the participant eligible to have an IRA in
addition to 401(k) plan.
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Immediate tax savings of a 401(k) plan |
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All amounts contributed into the plan are tax-deductible for that year and
reduces the overall taxes for that year.
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Deferred tax savings of a 401(k) plan |
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The contributions and investment returns are not taxed until the actual time of
distribution and withdrawal from the Plan Trust.
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