Required information Kathleen, age 56, works for MH, Inc. in Dallas, Texas. Kath
ID: 2532510 • Letter: R
Question
Required information Kathleen, age 56, works for MH, Inc. in Dallas, Texas. Kathleen contributes to a Roth 401k and MH contributes to a traditional 401k on her behalf. Kathleen has contributed $22,500 to her Roth 401k over the past six years. The current balance in her Roth 401K account is $37,500 and the balance in her traditional 401k is $26,250. Kathleen needs cash because she is taking a month of vacation to travel the world. Answer the following questions relating to distributions from Kathleen's retirement accounts assuming her marginal tax rate for ordinary income is 28%. d. If Kathleen retires from MH and then she receives a $3,750 distribution from her Roth 401k, how much will she be able to keep after paying taxes and penalties, if any, on the distribution? 3 Answer is complete but not entirely correct. Net distribution 3,180Explanation / Answer
d) Before reaching the age of 59 1/2 ,a tax of 28% plus a penalty of 10% would be atracted on making withdrawls from traditional 401k account .
Amount remaining after tax & penalty = $3750-($3750*(28%+10%)
Net Distribution = $3750-$1425 = $2325
e)Anyone one over 591/2 doesnt have to pay the early withdrawl penalty on non-qualified Roth IRA withdrawls. When employee's age is atleast 591/2 and the account is opened for five years, distribution is qualified for non-tax.The non-qualified distribution is treated as ordinary income and is taxed on a marginal rate.
In the present case, Kathleen is 60 years old, she is holds the account for 6 years . She need not pay the penalty of 10%
Her net contribution = $3750-($3750*28%)
=$2700
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