If you are age 25, single, wage income of$50,000, 401(k) at work, and invest $1,000into a Roth IRA, what is your spendingpower at age 70? Assume your tax rate nowis 15%, your tax rate in retirement is 20%,and the pretax annual return on theinvestment is 5%.a.) $7,188b.) $7,637c.) $8,985

Introduction IRA: An individual retirement account (IRA) is a tax-advantaged strategy to save for…

Answered: If you are age 25, single, wage income…

PAYROLL ACCT.,2019 ED.(LL)-TEXT

19th Edition

ISBN:9781337619783

Author:BIEG

Publisher:BIEG

Chapter4: Income Tax Withholding

Section: Chapter Questions

Problem 7QR

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Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $5,500 tax free to your individual retirement account, IRA. The account earns 7% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 17%. (a) How much tax do you save (in $) each year by making the retirement fund contributions? (b) Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) (c) Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $5,500 tax free to your individual retirement account, IRA. The account earns 7% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. a)How much tax do you save (in $) each year by making the retirement fund contributions? b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) c) Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. (a)How much tax do you save (in $) each year by making the retirement fund contributions? $ 1260 (b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $ ?
You purchase a REIT for $50. It distributes $3 consisting of $1 in income, $0.50 in long-term capital gains, $0.30 in short-term capital gains, and $1.20 in return of capital. After a year, you sell the stock for $56. If you are in the 30 percent income tax bracket and 15 percent long-term capital gains bracket, what are your taxes owed?
Assume that you begin saving 3% of your total income in an employer-provided retirement plan at work. Each year, your income increases by 4%. As a result, you increase the percentage of your income you devote to your retirement plan by 2%. How long will it take for you to be saving at least 20% of your income? (Assume no taxes.) Based on your calculations from part a, how much will you be saving (using the end-of-year savings rate) over the next 10 years if you earn $30,000 this year? What is an alternative approach you might recommend for this situation? Why might it be better?
You have $3,000 of after-tax income that you invest in a Traditional IRA. Recall that contributions to Traditional IRAs are tax deductible, i.e., you are investing pre-tax dollars. The investment earns a 10% return and you will withdraw the money as a lump-sum in 30 years while in retirement (after age 59.5). Your current marginal tax rate is 30% and your marginal tax rate in retirement will be 20%. How much will be your after-tax withdrawal? Group of answer choices $59,827 $41,879 $74,783 $36,644
You choose to invest your $3,410 income tax refund check (rather than spend it!) in an account earning 5% compounded annually. How much will the account be worth in 30 years? (Use the Table provided.) (Round your answer to the nearest cent.)
You have $3,000 of after-tax income that you invest in a Traditional IRA. Recall that contributions to Traditional IRAs are tax deductible, i.e., you are investing pre-tax dollars. The investment earns a 10% return and you will withdraw the money as a lump-sum in 30 years while in retirement (after age 59.5). Your current marginal tax rate is 30% and your marginal tax rate in retirement will be 20%. How much will be your after-tax withdrawal?
A client, age 50, who is currently earning $100,000 per year, wishes to retire in 15 years with a fixed annual retirement income of $125,000. The client expects to live 25 years in retirement and is comfortable assuming a rate of return of 8% and inflation of 3%. What is the capital amount required at the onset of retirement to support the client’s retirement income? a) $1,441,095 b) $1,874,532 c) $2,336,367 d) $1,334,347

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If you are age 25, single, wage income of $50,000, 401(k) at work, and invest $1,000 into a Roth IRA, what is your spending power at age 70? Assume your tax rate now is 15%, your tax rate in retirement is 20%, and the pretax annual return on the investment is 5%. a.) $7,188 b.) $7,637 c.) $8,985