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I was listening to NPRs 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 NPRs 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 the one scenario below. include tables detailing your calculations

For all three scenarios, 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 30% (Federal and state)

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