BOTH TAX DEFERRED AND TAX EXEMPT ONLY SUPERIOR IF INITIAL TAX RATES...

1. Both tax deferred and tax exempt

only superior if initial tax rates are

accounts provide a tax advantage in

higher than tax rates at the end of the

allowing tax free compounding while

Incorrect

deferral period.

funds are held in the account.

However, a tax deferred account is

Candidate discussion: If initial and end

superior for after-tax wealth

of period withdrawal tax rates are the

maximization because it provides an

same, the two account types produce the

same after-tax ending value. The TEA

initial tax deduction.

pays taxes at the initial rate and the TDA

at the ending rate. If initial rates are

lower, the TEA is superior. If initial rates

are higher, the TDA is superior.