Final answer:
Kim should consider contributing to an employer-sponsored 401(k) plan for retirement and a 529 plan for her son's college education. The 401(k) allows tax-deferred investments for retirement, while the 529 plan offers tax-advantaged savings for education expenses.
Step-by-step explanation:
Kim is contemplating her future financial planning and is considering savings options for both her son's college education and her own retirement. After analyzing the various savings methods available, the best options for Kim would be to start contributing to her employer-sponsored 401(k) plan for her retirement and a 529 plan for her son's college education. A 401(k) is a type of defined contribution plan where both the employer and employee can make contributions, which are then invested in various vehicles. These plans offer tax-deferred growth and the flexibility to carry over if Kim changes employment. For college savings, a 529 plan provides a way to invest after-tax dollars for qualified education expenses, also growing tax-free under current laws.
As a sales representative for a medical software company, Kim has the opportunity to take advantage of her workplace benefits to prepare for these significant future expenses. Aimed at retirement, the 401(k) account enjoys a special tax-deferred status, increasing the real rate of return on her investments by delaying taxes until retirement. For her son's college fund, a 529 plan is an ideal investment vehicle as it is specifically designed to support expenses associated with education while providing tax benefits and some flexibility in investment choices.