In 2022, Nitai (age 40) contributes 10 percent of his $123,000 annual salary to a Roth 401(k) account sponsored by his employer, AY Incorporated. AY Incorporated matches employee contributions to the employee's traditional 401(k) account dollar-for-dollar up to 10 percent of the employee's salary. Nitai expects to earn a 4 percent before-tax rate of return. Assume he leaves the contributions in the Roth 401(k) and traditional 401(k) accounts until he retires in 25 years and that he makes no additional contributions to either account. What are Nitai’s after-tax proceeds from the Roth 401(k) and traditional 401(k) accounts after he receives the distributions, assuming his marginal tax rate at retirement is 30 percent? (Use Table 1, Table 2.) Note: Round your intermediate calculations and final answers to the nearest whole dollar amount
In 2022, Nitai (age 40) contributes 10 percent of his $123,000 annual salary to a Roth 401(k) account sponsored by his employer, AY Incorporated. AY Incorporated matches employee contributions to the employee's traditional 401(k) account dollar-for-dollar up to 10 percent of the employee's salary. Nitai expects to earn a 4 percent before-tax rate of return. Assume he leaves the contributions in the Roth 401(k) and traditional 401(k) accounts until he retires in 25 years and that he makes no additional contributions to either account. What are Nitai’s after-tax proceeds from the Roth 401(k) and traditional 401(k) accounts after he receives the distributions, assuming his marginal tax rate at retirement is 30 percent? (Use Table 1, Table 2.) Note: Round your intermediate calculations and final answers to the nearest whole dollar amount
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
In 2022, Nitai (age 40) contributes 10 percent of his $123,000 annual salary to a Roth 401(k) account sponsored by his employer, AY Incorporated. AY Incorporated matches employee contributions to the employee's traditional 401(k) account dollar-for-dollar up to 10 percent of the employee's salary. Nitai expects to earn a 4 percent before-tax
Assume he leaves the contributions in the Roth 401(k) and traditional 401(k) accounts until he retires in 25 years and that he makes no additional contributions to either account. What are Nitai’s after-tax proceeds from the Roth 401(k) and traditional 401(k) accounts after he receives the distributions, assuming his marginal tax rate at retirement is 30 percent? (Use Table 1, Table 2.)
Note: Round your intermediate calculations and final answers to the nearest whole dollar amount.
Transcribed Image Text:**Future Value of Annuity of $1**
This table provides the future value of an annuity of $1 across different interest rates and periods. The table is comprehensive, showing values for interest rates ranging from 1.0% to 25.0% over 25 periods.
### Table Structure:
- **Columns**: Each column represents a different interest rate. The rates included are 1.0%, 2.0%, 3.0%, 3.75%, 4.0%, 4.25%, 5.0%, 5.6%, 6.0%, 7.0%, 8.0%, 9.0%, 10.0%, 11.0%, 12.0%, 13.0%, 14.0%, 15.0%, 20.0%, and 25.0%.
- **Rows**: Each row represents a different number of periods (n), ranging from 1 to 25.
### Explanation of Use:
- The table helps in determining how much $1 will grow over a specific number of periods at a given interest rate.
### Example Example Entry:
- For an interest rate of 5.0% over 5 periods, the future value of an annuity is 5.5256.
This table is a crucial tool for financial planning, assisting in calculating the future value of regular investments made over time.
Transcribed Image Text:**Future Value of $1**
This table illustrates the future value of $1 for varying interest rates and time periods. It can be used to estimate how much an initial investment of $1 will grow over time at different annual interest rates. The table helps understand the concept of compound interest and financial growth over different durations.
**Columns:**
The columns represent interest rates ranging from 1.0% to 25.0%. Each column is labeled with the respective interest rate.
**Rows:**
The rows represent the number of years, from 1 to 25. Each cell in the table provides the future value of $1 after the specified number of years at the corresponding interest rate.
**Example Values:**
- At 1% interest for 5 years, $1 will become approximately $1.0510.
- At 10% interest for 10 years, $1 will become approximately $2.5937.
- At 20% interest for 15 years, $1 will become approximately $15.4070.
- At 25% interest for 25 years, $1 will become approximately $86.7364.
This table serves as a practical tool for financial planning, allowing individuals to assess the growth of their savings over time.
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