Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. In 2017, Nina contributes 14 percent of her $102,000 annual salary to her 401(k) account. She expects to earn a 8 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 your intermediate calculations and final answers to the nearest whole dollar amount. Round Future value factor" to 4 decimal places.)

Explanation / Answer

a. Assume Nina’s marginal tax rate at retirement is 30 percent.

b. Assume Nina’s marginal tax rate at retirement is 20 percent.

c. Assume Nina’s marginal tax rate at retirement is 40 percent.

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

"It would be appreciated if you give your feedback"

Before-tax contribution $14,280 Future value factor 6.8485 Future value of contribution $97,796 Taxes payable on distribution ($29,339) After tax proceeds from distribution $68,457

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.