Business, 21.12.2019 07:31 meganldale15

Jenny (35 years old) is considering making a one-time contribution to either a traditional 401(k) plan or to a roth 401(k) plan. she plans to withdraw the account balance when she retires in 40 years. jenny expects to earn a 7% before-tax rate of return no matter which plan she contributes to.
which of the following statements is true?

a. if jenny's marginal tax rate in the year of contribution is higher than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k) plan than on the roth 401(k) plan.
b. if jenny's marginal tax rate in the year of contribution is lower than her marginal tax rate in the year of distribution, she will earn a higher after-tax rate of return on the traditional 401(k) plan than on the roth 401(k) plan.
c. jenny will earn the same after-tax rate of return no matter which plan she contributes to.
d. jenny is not allowed to make a one-time contribution to either plan.

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Jenny (35 years old) is considering making a one-time contribution to either a traditional 401(k) pl...

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