Question

Research 401K retirement savings plan. Then, consider the following scenario. John Smith's Scenario John is single living in Brooklyn, and he works at the XYZ company as a webpage designer. His annual salary is $75,000 a year. His company offers a 401K retirement savings benefit and it matches up to 6% of the participating employee's salary. John wants to participate in the program because it gives many benefits including that additional 6% money toward his retirement savings. He wants to figure out what amount would maximize his tax benefits and the company's match. He needs at least $2,300 per month for his living expenses. Suppose that you are his CFA. How much annual 401K contribution would you suggest to him? Present your solution on a one-page report with your explanation of how you arrived at that conclusion. Note that this homework DOES NOT require any solutions from Excel yet. You may use it, however, it is not necessary to figure out the contribution. We will build the Excel 401K application in the next lesson.

Answer 1

P. Nol As per the information about the Research 401k retirement Savings plan..... * A 401 (k) plan is tax - advantaged, defined - Contribution retirement account offered by many employers to their employees. Workers Can make Contributions to their 401(k) accounts through automatic payroll withholding, and their employers Can match some or all of those contributions. * The investment earnings in traditional 401 (k) plan are not taxed until the employee usthdraws that money, typically aftey retirement In a Roth 401 (k) plan, withdrawals can be tax free. * A 401(k) plan is Company - Sponsored stelirement account that employees can contribute to Employers may also make matching Contributions.

P.2 There are Hur basic types of 401(k)s – haditional and Roth - which differ primarily in how they're taxed. In a traditional 40 (k), employee Contributions reduce their income taxes for the year they are made, but their with drawals are taxed, with a Roth, employees. make contributions with post - tax income but Can make withdrawals tax- free. Contribution limits * first, It's important to know that the internal Revenue Service (IRss) Sets annual limits on Contributions. The elective deferral (Contribution) limit for employees who participate a 401(k) is $ 19,500 for tax year 2020. * There's There's Catch-up Contribution for employees over, who participate in any of these plans. It allows for an additional $ 6,500 Contribution in 2020 in age 50 and

P.3 life style, a IDAL CONTRIBUTION * Depends on individual retirement goals, existing gesexerces, style, and family decisions, but a Common rule of thumb is to set aside at least 106% of your goose earnings as Start. * There is no ideal Contribution to a plan unless there is a Company match. you Should always take full advantage of a Company match because it is essentially free money that the Company gives you. 401 (K) plean, Give lot. Thank a positive lake. It's help you..