This article is within the scope of WikiProject Business, a collaborative effort to improve the coverage of
business articles on Wikipedia. If you would like to participate, please visit the project page, where you can join
the discussion and see a list of open tasks.BusinessWikipedia:WikiProject BusinessTemplate:WikiProject BusinessWikiProject Business articles
This article is within the scope of WikiProject Finance & Investment, a collaborative effort to improve the coverage of articles related to
Finance and
Investment on Wikipedia. If you would like to participate, please visit the project page, where you can join
the discussion and see a list of open tasks.Finance & InvestmentWikipedia:WikiProject Finance & InvestmentTemplate:WikiProject Finance & InvestmentFinance & Investment articles
This article is within the scope of
WikiProject Taxation, a project which is currently considered to be inactive.TaxationWikipedia:WikiProject TaxationTemplate:WikiProject TaxationTaxation articles
This article is within the scope of WikiProject United States, a collaborative effort to improve the coverage of topics relating to the
United States of America on Wikipedia. If you would like to participate, please visit the project page, where you can join the ongoing discussions.
This article is within the scope of WikiProject Law, an attempt at providing a comprehensive, standardised, pan-jurisdictional and up-to-date resource for the
legal field and the subjects encompassed by it.LawWikipedia:WikiProject LawTemplate:WikiProject Lawlaw articles
Cleanup : Fix the withdrawal of funds section. Need to consider after tax contributions, pre-1972, 1986-whatever contributions, and the language on the penalty and exceptions needs to be consistent. It's a little contradictory from the first to second paragraphs.
Expand : Distribution discussion to cover RMD's for inherited plans, Briefly cover profit sharing provisions.
Other : Fiduciary responsibility; Break up the details and technical details sections into topical sections. Possibly (A)Contributions; (B)Administration (the plan document, testing, safe harbors, QNEC, etc); (C)Separate accounts, exclusive benefit; (D) Describe top-heavy 401(k) plans
This page has archives. Sections older than 90 days may be automatically archived by Lowercase sigmabot III.
All earnings... what?
Hanging sentence:
"...these contributions are made on an after-tax basis and all earnings."
Capital Gains in 401k
Under the heading Taxation, I don't understand the statement "Earnings from investments in a 401(k) account in the form of capital gains are not subject to capital gains taxes."
That seems to be misleading. All profits in a 401k are subject to normal income taxes upon withdrawal, excepting possibly for a special provision called NUA for company stock inside a 401K.
I am thinking the original author is probably trying to say, compared to mutual funds which often have annual capital gains distributions with tax liability, 401K allows savings to accumulate tax-deferred until withdrawal.
So the first sentence should say:
"Income taxes on pre-tax contributions and investment earnings in the form of interest and dividends add: and capital gains are tax deferred."
Upon withdrawal all 401K gains are taxed as normal income (short term gains tax treatment), excepting for a special provision called NUA which allows favorable tax treatment (lower long term gains tax rates) for certain company stock gains, subject to the NUA rules.
I think it's accurate in that the gains themselves are not taxed while in the fund. Withdrawal is another issue, one that that sentence is not addressing.
JesseRafe (
talk)
17:13, 10 July 2018 (UTC)reply
Withdrawals are taxed, not profits. See the link in the preamble. Understanding the withdrawals instead to be an allocation of principal between the account's two owners allows for, and explains why, everyone gets a benefit from permanently sheltering profits from tax. Obviously they could not get that benefit if profits were taxed on withdrawal.
KiwiSaver isn't a tax deferred arrangement (it has no tax offset or effect on your net income). The statement in paragraph two of Other Countries implies that KiwiSaver is an equivalent scheme to a 401(k) (noting that the UK and Australia do have similar, albeit not identical, schemes). Happy to discuss, but I'm going to remove the NZ reference unless there is a specific point to it being a comparison (that NZ does not have an equivalent).
Roche-Kerr (
talk)
00:45, 25 April 2024 (UTC)reply