Question
I was listening to NPR's Weekend Marketplace on the drive home and they were talking about being sure to fund our 401(k) plans. If I
I was listening to NPR's Weekend Marketplace on the drive home and they were talking about being sure to fund our 401(k) plans. If I decide to begin saving for retirement now, how do I choose between the "traditional" and the Roth versions offered by my employer? All I can afford for the contribution and any income taxes (in total) is $12,000.
compare his expected after-tax retirement fund balances from the two alternatives (traditional and Roth) for each of the three scenarios below. including tables detailing your calculations .
For the scenario, you must assume the following information:
- Anticipated marginal tax rate until retirement is 25% (Federal and state)
- Annual total commitment of $12,000 per year (in pre-tax dollars) until he retires in 30 years (note that you must convert the $12,000 into an after-tax amount for any contributions that are not excludible from current gross income)
- Annual earnings rates in all funds are 5% (before-tax rate)
Scenario #1
- Anticipated marginal tax rate at retirement is 20% (Federal and state)
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