Kim (50 Years of Age) Is Considering Whether to Participate

question 54

Essay

Kim (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). Kim 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 Kim 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%.
1) What would be Kim's after-tax accumulation in 20 years if she contributes $4,000 to a Roth 401(k) account? 2) What would be her after-tax accumulation in 20 years if she contributes $5,000 to a traditional 401(k) account?

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Eastern Europe

A geographic and cultural region comprising the eastern part of the European continent, often characterized by its historical ties to Byzantine, Orthodox, and the Soviet influences.

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A saint whose devotion and veneration are widespread and significant among the faithful, often recognized for their miracles, virtuous lives, and spiritual guidance.

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A significant social, political, or humanitarian goal that mobilizes people and resources toward achieving a grandiose objective.

Freedom

The right or freedom to conduct oneself, verbalize opinions, or contemplate ideas without facing obstacles or constraints.