Retirement Planning Quiz
Correct Answer:c) 401(k)
Reason: A 401(k) is an employer-sponsored retirement plan, unlike the other options listed.
Correct Answer:c) It maximizes the power of compounding.
Reason: Starting to save early allows your investments more time to grow through compounding, where the returns on your money earn their own returns.
Correct Answer:c) Contributions are taxable, and withdrawals are tax-free.
Reason: Roth IRA contributions are made with post-tax income, but withdrawals in retirement are not taxed.
Correct Answer:a) Traditional IRA
Reason: Contributions to a Traditional IRA can be tax-deductible in the contribution year, but withdrawals in retirement are taxed.