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8. Benefits of traditional and Roth 401(k) plans Traditional 401(k) versus Roth 401(k) Megan has...

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Finance

8. Benefits of traditional and Roth 401(k) plans

Traditional 401(k) versus Roth 401(k)

Megan 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 $14,400 contribution. Megans salary is $106,500 per year, and she is in the 32% tax bracket.

If Megan 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, Megan 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 Megan decides to open both 401(k) plans, splitting what she can afford to contribute equally between both plans.

Under this scenario, Megans contribution amount will be _

.And the amount offset via a reduced tax bill will be _

.

When Megan retires, which plans monies will she be able to exclude from taxable income? Roth or Traditional?

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