Question

Which investor would benefit from a pre-tax deduction? Select all that apply.

Rose is a recent college graduate who currently needs as much take-home pay as possible.
May is a young adult who currently pays low taxes but anticipates higher tax rates in the future.
Andre is a mid-career worker who currently pays high taxes and wants to begin investing to save for retirement.
Chen is just beginning to save for retirement and wants to reduce his income tax burden for the current year.
Sean is saving for a down payment on a house and needs his highest possible gross income to qualify for the mortgage.

Answer 1

Andre and Chen.

- Andre: pays high taxes now and wants to save for retirement, so a pre‑tax deduction lowers his current taxable income and tax bill.
- Chen: wants to reduce his income tax burden this year, which a pre‑tax deduction achieves.

Not selected:
- Rose needs maximum take‑home pay now — pre‑tax retirement contributions reduce immediate cash available.
- May pays low taxes now and expects higher taxes later — she’d likely prefer post‑tax (Roth) savings.
- Sean needs the highest reported gross income for a mortgage and wouldn’t want deductions that lower his reported income.