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His company offers a 401K retirement savings benefit, and it matches up to 6% of the participating employee's salary. John wants to

His company offers a 401K retirement savings benefit, and it matches up to 6% of the participating employee's salary. John wants to

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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John is a 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 the additional 6% money toward retirement savings. He wants to figure out how much contribution to the 401K plan 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 explaining how you arrived at that conclusion.
Transcribed Image Text:John is a 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 the additional 6% money toward retirement savings. He wants to figure out how much contribution to the 401K plan 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 explaining how you arrived at that conclusion.
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