Jenny (35 Years Old) Is Considering Making a One-Time Contribution

question 10

Multiple Choice

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.

---

Definitions:

Turkey

A country located at the crossroads of Europe and Asia, known for its rich history, cultural heritage, and strategic geopolitical position.

Trade Center

A hub or area where commercial transactions and exchanges take place, often involving a concentration of businesses and trade-related infrastructure.

Tay-Sachs Allele

A genetic variant associated with Tay-Sachs disease, a fatal disorder that affects the nervous system and is marked by the accumulation of certain lipids in the brain.

Selective Pressure

An evolutionary force that leads to changes in genetic traits within a population by favoring certain variants over others.