Why Does a Tax-Deferred Retirement Account Accumulate More Money Than

question 97

Multiple Choice

Why does a tax-deferred retirement account accumulate more money than a taxable account,assuming the same amount is contributed every year and the accounts earn the same return every year?

• A)There are different investment options available for tax-deferred accounts.
• B)You can take bigger risks with assets that generate higher returns in a tax-deferred account.
• C)With tax-deferred accounts,there are no income or capital gains tax liabilities on account activity.
• D)All of the above are correct.
• E)Only A and B are correct.

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Definitions:

Percentage Increase

A measure of how much a quantity has grown relative to its previous value, expressed as a percentage.

Horizontal Analysis

A financial analysis technique that compares historical financial data across consecutive periods to identify trends and growth patterns.

Vertical Analysis

A method of financial statement analysis in which each entry for each of the three major categories of accounts (assets, liabilities, and equity) or income and expenses is represented as a proportion of a total account.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.