Homework Answers
Ans:
a. Assume Nina's marginal tax rate at retirement is 30 percent.
| After tax proceeds from distribution | $31,281 |
Explanations:
| Particulars | |
| Before-tax contribution (a) |
$6,640 ($83,000 x 8%) |
| Future value factor(b) |
6.73 1.120 (10% annual rate for 20 years) |
| Future value of contribution (c) = (a x b) | $44,687 |
| Taxes payable on distribution (d) |
($13,406) ($44,687 x 30% tax rate) |
| After tax proceeds from distribution (e) = (c - d) | $31,281 |
Ans:
b. Assume Nina's marginal tax rate at retirement is 20 percent.
| After tax proceeds from distribution | $35,750 |
Explanations:
| Particulars | |
| Before-tax contribution (a) |
$6,640 ($83,000 x 8%) |
| Future value factor(b) |
6.73 1.120 (10% annual rate for 20 years) |
| Future value of contribution (c) = (a x b) | $44,687 |
| Taxes payable on distribution (d) |
($8,937) ($44,687 x 20% tax rate) |
| After tax proceeds from distribution (e) = (c - d) | $35,750 |
Ans:
c. Assume Nina's marginal tax rate at retirement is 40 percent.
| After tax proceeds from distribution | $26,812 |
Explanations:
| Particulars | |
| Before-tax contribution (a) |
$6,640 ($83,000 x 8%) |
| Future value factor(b) |
6.73 1.120 (10% annual rate for 20 years) |
| Future value of contribution (c) = (a x b) | $44,687 |
| Taxes payable on distribution (d) |
($17,875) ($44,687 x 40% tax rate) |
| After tax proceeds from distribution (e) = (c - d) | $26,812 |
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