Question

You want to save for your child’s education, you can either choose an account that is federally tax free that earns 6% or a regular taxed invested that earns 7%. If your marginal tax rate is 25%, which should you choose? (Show your work)

Answer 1

we would get .75 * 7 % which is 5.25% if we chose the taxable account, so take the 6%