1) Keisha (50 years of age) is considering whether to participate in her company's Roth 401(k) or...
Question:
1) Keisha (50 years of age) is considering whether to participate in her company's Roth 401(k) or traditional 401(k). This year, she plans to invest either $4,000 in a Roth 401(k) or $5,000 in a traditional 401(k). Keisha plans on leaving the contribution in the retirement account for 20 years when she will receive a distribution of the entire balance in the account. Her employer does not have a matching program for employee contributions to retirement accounts. Assume Keisha can earn a 6 percent before tax return in either account and that she anticipates that in 20 years her tax rate will be 30%.
a) What would be Keisha's after-tax accumulation in 20 years if she contributes $4,000 to a Roth 401(k) account?
b) What would be her after-tax accumulation in 20 years if she contributes $5,000 to a traditional 401(k) account?Introduction to Accounting An Integrated Approach
ISBN: 978-0078136603
6th edition
Authors: Penne Ainsworth, Dan Deines