10. Benefits of traditional and Roth 401(k) plans Traditional 401(k) versus Roth 401(k) Maria has decided to contribute to a savings program. She can open a traditional 401(k) or a Roth 401(k) and has determined that she can afford a $10,800 contribution. Maria’s salary is $34,500 per year, and she is in the 25% tax bracket. If Maria decides to go with a traditional 401(k), her contribution amount will be . And the amount offset via a reduced tax bill will be . If, instead, Maria decides to go with a Roth 401(k), her contribution amount will be . And the amount offset via a reduced tax bill will be . Assuming all the same facts, suppose that Maria decides to open both 401(k) plans, splitting what she can afford to contribute equally between both plans. Under this scenario, Maria’s contribution amount will be . And the amount offset via a reduced tax bill will be . When Maria retires, which plan’s monies will she be able to exclude from taxable income?
10. Benefits of traditional and Roth 401(k) plans Traditional 401(k) versus Roth 401(k) Maria has decided to contribute to a savings program. She can open a traditional 401(k) or a Roth 401(k) and has determined that she can afford a $10,800 contribution. Maria’s salary is $34,500 per year, and she is in the 25% tax bracket. If Maria decides to go with a traditional 401(k), her contribution amount will be . And the amount offset via a reduced tax bill will be . If, instead, Maria decides to go with a Roth 401(k), her contribution amount will be . And the amount offset via a reduced tax bill will be . Assuming all the same facts, suppose that Maria decides to open both 401(k) plans, splitting what she can afford to contribute equally between both plans. Under this scenario, Maria’s contribution amount will be . And the amount offset via a reduced tax bill will be . When Maria retires, which plan’s monies will she be able to exclude from taxable income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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10. Benefits of traditional and Roth 401(k) plans
Traditional 401(k) versus Roth 401(k)
Maria has decided to contribute to a savings program. She can open a traditional 401(k) or a Roth 401(k) and has determined that she can afford a $10,800 contribution. Maria’s salary is $34,500 per year, and she is in the 25% tax bracket.
If Maria decides to go with a traditional 401(k), her contribution amount will be
.
And the amount offset via a reduced tax bill will be
.
If, instead, Maria decides to go with a Roth 401(k), her contribution amount will be
.
And the amount offset via a reduced tax bill will be
.
Assuming all the same facts, suppose that Maria decides to open both 401(k) plans, splitting what she can afford to contribute equally between both plans.
Under this scenario, Maria’s contribution amount will be
.
And the amount offset via a reduced tax bill will be
.
When Maria retires, which plan’s monies will she be able to exclude from taxable income?
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