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Sarah has a choice between contributing to a Traditional 401(k) plan or a Roth 401(k) plan. She is 24 years old and graduated from university

Sarah has a choice between contributing to a Traditional 401(k) plan or a Roth 401(k) plan. She is 24 years old and graduated from university 2 years ago with an undergraduate degree in finance. Her current salary is $50,000 and she feels that her compensation will increase steadily through her career.

A.

Since she is young, she should not invest in either 401(k) plan since withdrawing funds before age 59 would incur a penalty

B.

She should invest in a Roth 401(k) and forego the tax deductions on contributions

C.

She should invest in a Traditional 401(k) plan to take advantage of the tax deductions on contributions

D.

She should invest in a Traditional 401(k) plan because withdrawals after age

59 are tax free.

E.

It does not matter which 401(k) plan she chooses since they are virtually the same.

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