Why this is correct (Q15 — you keep $800 after 20% tax on $1,000): This is a simple tax-timing arithmetic example demonstrating the difference between pre-tax and after-tax values. A Traditional (pre-tax) account means the $1,000 is sheltered from tax when contributed but will be taxed on withdrawal. If the withdrawal is taxed at 20%, then the tax on a $1,000 distribution equals 0.20 × $1,000 = $200. Subtract that tax from the gross distribution: $1,000 − $200 = $800 — the net amount you keep after tax. This numeric demonstration is useful for beginners because it shows concretely how traditional pre-tax contributions reduce taxable income today but create taxable income later. It also highlights why Roth vs. Traditional decisions hinge on expectations of tax rates at contribution vs. withdrawal.

Practical takeaway & budgeting notes: Use this arithmetic when estimating the real purchasing power of withdrawals. If you expect lower future tax rates, pre-tax contributions may leave you with more after-tax money in retirement; if you expect higher rates, Roth may be preferable. Remember that tax rates can change and that withdrawals may affect other tax-sensitive measures (for example, Medicare premiums or tax brackets). When modeling retirement income, include estimated taxes on withdrawals to project net income, not just gross distributions. Also consider splitting contributions between pre-tax and Roth to diversify tax exposure.