7. In 2017, Nina contributes 10 percent of her $100,000 annual salary to her 401

Question

7. 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.)

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

Before-tax contribution

?

Future value factor

?

Future value of contribution

?

Taxes payable on distribution

?

After tax proceeds from distribution

?

Before-tax contribution

?

Future value factor

?

Future value of contribution

?

Taxes payable on distribution

?

After tax proceeds from distribution

?

Explanation / Answer

10000

(100000*10%)

5.4274

(1.07^25)

54274

(10000*5.4274)

(21710)

(54274*40%)

32564

(54274-21710)

Before-tax contribution

10000

(100000*10%)

Future value factor

5.4274

(1.07^25)

Future value of contribution

54274

(10000*5.4274)

Taxes payable on distribution

(21710)

(54274*40%)

After-tax proceeds from distribution

32564

(54274-21710)

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