Traditional 401(k) versus Roth 401(k) Larry has decided to contribute to a savings program. He can open a traditional 401(k) or a Roth 401(k) and has determined that he can afford a $13,200 contribution. Larry's salary is $82,500 per year, and he is in the 24% tax bracket. If Larry decides to go with a traditional 401(k), his contribution amount will be And the amount offset via a reduced tax bill will be $ If, instead, Larry decides to go with a Roth 401(k), his contribution amount will be And the amount offset via a reduced tax bill will be $ Assuming all the same facts, suppose that Larry decides to open both 401(k) plans, splitting what he can afford to contribute equally between both plans. Under this scenario, Larry's contribution amount will be And the amount offset via a reduced tax bill will be When Larry retires, which plan's monies will he be able to exclude from taxable income?
Traditional 401(k) versus Roth 401(k) Larry has decided to contribute to a savings program. He can open a traditional 401(k) or a Roth 401(k) and has determined that he can afford a $13,200 contribution. Larry's salary is $82,500 per year, and he is in the 24% tax bracket. If Larry decides to go with a traditional 401(k), his contribution amount will be And the amount offset via a reduced tax bill will be $ If, instead, Larry decides to go with a Roth 401(k), his contribution amount will be And the amount offset via a reduced tax bill will be $ Assuming all the same facts, suppose that Larry decides to open both 401(k) plans, splitting what he can afford to contribute equally between both plans. Under this scenario, Larry's contribution amount will be And the amount offset via a reduced tax bill will be When Larry retires, which plan's monies will he be able to exclude from taxable income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Traditional 401(k) versus Roth 401(k)
Larry has decided to contribute to a savings program. He can open a traditional 401(k) or a Roth 401(k) and has determined that he can afford a
$13,200 contribution. Larry's salary is $82,500 per year, and he is in the 24% tax bracket.
If Larry decides to go with a traditional 401(k), his contribution amount will be
And the amount offset via a reduced tax bill will be $
If, instead, Larry decides to go with a Roth 401(k), his contribution amount will be
And the amount offset via a reduced tax bill will be $
Assuming all the same facts, suppose that Larry decides to open both 401(k) plans, splitting what he can afford to contribute equally between both
plans.
Under this scenario, Larry's contribution amount will be
And the amount offset via a reduced tax bill will be
When Larry retires, which plan's monies will he be able to exclude from taxable income?
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