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%.(Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)
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?

Question

Quizplus · Accepted Answer

The Answer of 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%.(Round future value factors to 5 decimal places and the future value and final answers to the nearest whole number)
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?

Kim (50 Years of Age)is Considering Whether to Participate in Her