In 2015, Nina contributes 11 percent of her $122,000 annual salary to her 401(k)

Question

In 2015, Nina contributes 11 percent of her $122,000 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 20 years, what is Nina’s after-tax accumulation from her 2015 contributions to her 401(k) account? (Round intermediate calculations to the nearest whole dollar amount. Round "Future value factor" to 4 decimal places.)

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.

In 2015, Nina contributes 11 percent of her $122,000 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 20 years, what is Nina’s after-tax accumulation from her 2015 contributions to her 401(k) account? (Round intermediate calculations to the nearest whole dollar amount. Round "Future value factor" to 4 decimal places.)

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 / Answer

Nina's 2015 salary              122,000 11% contribution to 401 k              13,420 Interest earned @8% Compounding factor for 20 years @ 8% =1.08^20 Maturity value of 2015 contribution=13420*1.08^20= $    62,550.04 So Before Tax accumulation of 2015 contribution to 401k of Nina= $    62,550.04 A After Tax Accumulation when Tax rate 30%=62550.04*0.70= $    43,785.03 B After Tax Accumulation when Tax rate 20%=62550.04*0.80= $    50,040.04 C After Tax Accumulation when Tax rate 40%=62550.04*0.40= $    37,530.03

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

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