Lielle is currently in the 24% tax bracket but expects to be in the 12% tax bracket when she retires. Her employer offers both traditional 401(k) and Roth 401(k) plans with matching contributions. Lielle wants to minimize her tax burden both now and in retirement. Which retirement plan is the best for Lielle?

A traditional 401(k) lets Lielle contribute before taxes, reducing her taxable income while she is in the 24% bracket. She expects to withdraw the money in retirement when her tax bracket is lower, at 12%, so those withdrawals are likely to be taxed at a lower rate. The conservative investment strategy does not determine the tax advantage; among the choices, the traditional 401(k) best fits her tax situation and includes employer matching.

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