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
  

Answer 1

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