Monica expects to be in a much higher tax bracket when she retires than she is now, so she wants to invest in a retirement account in which her withdrawals will be tax-free. One way for her to achieve this is through a traditional IRA.

Question

Quizplus · Accepted Answer

Monica's goal of tax-free withdrawals in retirement would be better achieved through a Roth IRA, as contributions to a traditional IRA are tax-deductible now but withdrawals are taxed in retirement. With a Roth IRA, contributions are taxed now but withdrawals are tax-free in retirement, making it a better option for someone in a higher tax bracket later in life.

Monica Expects to Be in a Much Higher Tax Bracket