Question
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. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started