MULTIPLE CHOICE QUESTION

Scenario: You are 21-years-old and working in the marketing department of a medium-sized corporation. You are earning an annual salary of $40,000 paid every two weeks. Your employer provides a 401(k) plan, and matches employee contributions by 50% up to a maximum of 3% of your annual salary. You are in a 25% marginal tax rate. Read each of the statements below and indicate whether it reflects an advantage associated with investing in a tax-sheltered retirement account. An Not an Advantage Advantage Statement It is best that your contributions start later rather than sooner. Retirement accounts provide their greatest advantage when you start saving earlier-rather than later-in your lifetime. The greater your marginal tax rate, the greater the tax savings associated with contributions to a tax-sheltered retirement account. The maximum dollar amount your employer will contribute to your 401(k) account this year is $100 $46 $1,200 $200 Assume that you contribute 6% of your gross income to your 401(k) account. How much will you contribute annually and per pay-period to your retirement account? $400 and $120, respectively $2,400 and $92, respectively O $120,000 and $100, respectively O $2,400 and $400, respectively O $2,400 and $200, respectively Scenario: You are 21-years-old and working in the marketing department of a medium-sized corporation. You are earning an annual salary of $40,000 paid every two weeks. Your employer provides a 401(k) plan, and matches employee contributions by 50% up to a maximum of 3% of your annual salary. You are in a 25% marginal tax rate. Read each of the statements below and indicate whether it reflects an advantage associated with investing in a tax-sheltered retirement account. An Not an Advantage Advantage Statement It is best that your contributions start later rather than sooner. Retirement accounts provide their greatest advantage when you start saving earlier-rather than later-in your lifetime. The greater your marginal tax rate, the greater the tax savings associated with contributions to a tax-sheltered retirement account. The maximum dollar amount your employer will contribute to your 401(k) account this year is $100 $46 $1,200 $200 Assume that you contribute 6% of your gross income to your 401(k) account. How much will you contribute annually and per pay-period to your retirement account? $400 and $120, respectively $2,400 and $92, respectively O $120,000 and $100, respectively O $2,400 and $400, respectively O $2,400 and $200, respectively