RL31770
Individual Retirement Accounts and 401(k) Plans
December 22, 2008
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Summary
In the interest of encouraging workers to save for retirement, Congress has authorized the creation of several kinds of retirement savings plans that qualify for reduced or deferred income taxes. These plans provide a financial incentive for people to save, either by allowing workers and employers to deduct from income the amount they contribute to the plans or to take tax-free distributions from the plans after they retire. This report summarizes the provisions of federal law that govern the taxes applicable to pre-retirement distributions from retirement accounts and the situations in which distributions must be taken in order to avoid a tax penalty.
