Asked by Kayla Driffin on Apr 26, 2024
Verified
A saver who expects to have a higher tax rate after retirement would prefer a ________.
A) Roth retirement plan
B) traditional retirement plan
C) 401k plan
D) 403b plan
Roth Retirement Plan
A type of retirement savings account that allows for tax-free withdrawals in retirement, with contributions made with after-tax dollars.
Higher Tax Rate
A tax bracket imposing a greater percentage of taxation on individuals, corporations, or particular transactions.
- Gain insight into the distinct tax treatments of traditional and Roth retirement plans, with an emphasis on withdrawal protocols.
Verified Answer
CC
Claudia CarrilloApr 30, 2024
Final Answer :
A
Explanation :
A saver who expects to have a higher tax rate after retirement would prefer a Roth retirement plan because contributions are taxed upfront, but withdrawals are tax-free in retirement. This would be beneficial if the saver's tax rate is expected to be higher during retirement than it is now. The other options, traditional retirement plans (B), 401k plans (C), and 403b plans (D), are taxed upon withdrawal in retirement, which may not be as beneficial for someone with a higher tax rate at that time.
Learning Objectives
- Gain insight into the distinct tax treatments of traditional and Roth retirement plans, with an emphasis on withdrawal protocols.
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