Daniel Has Accepted a New Job and Is Reviewing the Retirement

question 1609

Essay

Daniel has accepted a new job and is reviewing the retirement plan information. He has a choice of participating in the company's conventional Sec. 401(k) plan or a Roth 401(k) plan. Explain the difference between the two plans in terms of employee contributions and retirement distributions from the plan.

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Definitions:

Face Amount

The value of a financial instrument as stated on the instrument itself.

Bond Discount

Occurs when a bond is issued for less than its par (or face) value; the difference between the issue price and the par value.

Interest Payment

The amount paid by a borrower to a lender for the use of borrowed money, typically expressed as an annual percentage of the loan principal.

Journal Entry

A recording of a financial transaction in an accounting journal, indicating the accounts and amounts to be debited and credited.