FAQ: What is "Qualified Money"?« Back to Questions List
FAQ: What's the difference between qualified and non-qualified money? |
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What’s the difference between Qualified and Non-Qualified money? Qualified Money is the label given to money set aside pre-taxationfor Tax-deferred Retirement Programs (TDRPs) such as 401(k), 403(b), and IRA accounts. People often choose to divert a portion of their earned income into these accounts to put off paying income taxes until they are in a lower tax bracket in retirement; at least, that’s what has been promoted to them. While deferring taxation sounds like a good option, that stance comes with some of its own problems and hoops through which a person must jump. The main draw for diverting your earnings into this system is often the employer match that may offer an instant 100% gain as your employer matches every dollar you contribute with another dollar (1:1, or a percentage) of employer benefit into your account. It can be very tempting to ”take the free money”. The strings attached to this system are outlined in my TDRP video. Non-Qualified Money is money that a person has already paid income taxes upon and is therefore free of any governmental restrictions, fees, penalties, and further involvement; except for sales taxes applied as you may choose to spend this money. |