I know that it is a retirement account, so why cant someone put like $10,000 in at once if they have the cash? Also what happens if you do overpay, why is it even possible to overpay in the first place?
In: Economics
Retirement Accounts are used for tax deference. You put in pre-tax money now, and you tax it later. Ideally, the money you’re putting in now is money that would be in a higher tax bracket now, but comes out in a lower tax bracket later (in addition to making interest on all that pre-tax money).
But if you just allowed unlimited contributions, then people could put away a LOT of pre-tax money. The government still wants some of that income tax now, so they set limits on how much you can deposit at once.
Latest Answers