Required information [The following information applies to the questions display
ID: 2410670 • Letter: R
Question
Required information [The following information applies to the questions displayed below.] In 2017, Nina contributes 10 percent of her $100,000 annual salary to her 401(k) account. She expects to earn a 7 percent before-tax rate of return. Assuming she leaves this (and any employer contributions) in the account until she retires in 25 years, what is Nina’s after-tax accumulation from her 2017 contributions to her 401(k) account? (Use Table 1, Table 2, Table 3, Table 4.) (Round "Future value factor" to 4 decimal places. Round your intermediate calculations to the nearest whole dollar amount.) a. Assume Nina’s marginal tax rate at retirement is 30 percent.
Required information
[The following information applies to the questions displayed below.]
In 2017, Nina contributes 10 percent of her $100,000 annual salary to her 401(k) account. She expects to earn a 7 percent before-tax rate of return. Assuming she leaves this (and any employer contributions) in the account until she retires in 25 years, what is Nina’s after-tax accumulation from her 2017 contributions to her 401(k) account? (Use Table 1, Table 2, Table 3, Table 4.) (Round "Future value factor" to 4 decimal places. Round your intermediate calculations to the nearest whole dollar amount.)
a. Assume Nina’s marginal tax rate at retirement is 30 percent.
Required information
[The following information applies to the questions displayed below.]
In 2017, Nina contributes 10 percent of her $100,000 annual salary to her 401(k) account. She expects to earn a 7 percent before-tax rate of return. Assuming she leaves this (and any employer contributions) in the account until she retires in 25 years, what is Nina’s after-tax accumulation from her 2017 contributions to her 401(k) account? (Use Table 1, Table 2, Table 3, Table 4.) (Round "Future value factor" to 4 decimal places. Round your intermediate calculations to the nearest whole dollar amount.)
a. Assume Nina’s marginal tax rate at retirement is 30 percent.
1. before-tax contribution
2. future value factor
3. taxes payable on distribution
4. after tax proceeds from distribution
Explanation / Answer
Answers (a)
The Assume Nina’s marginal tax rate at retirement is 30 percent.
The Before-tax contribution
$14,280
The Future value factor
6.8485
The Future value of contribution
$97,796
The Taxes payable on distribution
($29,339)
The After tax proceeds from distribution
$68,457
The Explanation :
Before-tax contribution = 0.14 x $102,000 = $14,280
Future value factor = 6.8485 (from FV table)
Future value contribution = $14,280 x 6.8485 = $97,796
Tax payable = $97,796 x Tax rate
After tax proceeds = Future value contribution - Tax Payable
The Before-tax contribution
$14,280
The Future value factor
6.8485
The Future value of contribution
$97,796
The Taxes payable on distribution
($29,339)
The After tax proceeds from distribution
$68,457
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