Question

21. Mrs. Kirk withdrew $30,000 from a retirement account and used the money to furnish her new home. Her marginal tax rate is 24 percent. Compute the tax cost of the withdrawal in each of the following cases: a. Mrs. Kirk is 56 years old. She withdrew the money from a personal savings account. b. Mrs. Kirk is 56 years old. She withdrew the money from her employer-sponsored qualified plan upon her retirement from the company. Mrs. Kirk made no after-tax contributions to this plan. c. Mrs. Kirk is 56 years old. She withdrew the money from her employer-sponsored qualified plan, but she intends to work for the employer for at least 10 more years. Mrs. Kirk made no after-tax contributions to this plan. d. Mrs. Kirk is 61 years old. She withdrew the money from her employer-sponsored qualified plan, but she intends to work for the employer for at least 4 more years. Mrs. Kirk made no after-tax contributions to this plan.

Answer 1

SOL! Given data. mrs. kirk with drew $30.000 from a retirement account and used the money furnish her new home. - margina taud rate is 94 percent. the money (a) mos. kisk is 56 years old she with drew from a personal savings account The amount with drawn from the personal savi angs account does not come under tax slab, so NO tax cost is applicable in this case. (6) In this case there is no penalty since it is not premature because the withdrawal has taken place Post retirement

- The only cost would be tan cost calculated as - 30.000 X marginal tax rate = 30.000 X 94% = $7.900 © In this case there would be penalty since, It is premature because the withdraws has tecken place before getirement. o the tax cost would be calculated as 30.000 X marginal tou rate $ 7.9008 Penalty is 30.000 X employer for at least 10 more years Penalty is = 30.000 x 10% -$3,000 Total - The tax cost would be calculated at penalty. Total $ 7,200 + 3.000 Total = $10.200

is applicable She has crossed 59.5 age no penalty as. The only cost would be tax cost calculated 30.000 X marginal face cate - 30.000 X 24 -7.900 would be tan cost a $7900 The only cost