Why do people have to pay back money they take out from their retirement, it’s their money right?
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The idea is the following: put the money in a retirement savings 401K, other countries have equivalents too. You don’t have to pay income on that money.
That encourages you to safe, but that’s not all it is.
It also gets you some of that money back which you could used to build some more wealth.
Once you’re retired, you’re likely to have less income, so while you now have to pay taxes on the savings, you will likely pay less due to having lower income. The deal is basically: we’ll defer the taxes you’d have to pay to give you an incentive to save and you’re likely to pay less taxes on that money later on too.
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