Amalia is 55 years old and earns a moderate income in the 12% tax bracket. She plans to retire in 10 years and wants to avoid high-risk investments. Her employer offers a 401(k) plan with a matching contribution, and Amalia is looking for a way to secure her income for retirement while reducing her tax burden. What would be the best retirement plan for Amalia?
Answer
A
Roth 401(k) with a conservative investment strategy
B
traditional 401(k) with a conservative investment strategy and employer contributions
C
traditional IRA with a conservative investment strategy
D
Roth IRA with an aggressive investment strategy
Explanation
A traditional 401(k) is the strongest fit because Amalia can contribute pre-tax income, reducing her taxable income now, and her employer’s matching contributions add to her retirement savings. A conservative investment strategy addresses her wish to avoid high risk. The Roth options do not reduce her current taxable income, and the aggressive strategy in choice D conflicts with her risk preference.
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