James needs $80,000 after tax in retirement income. His expected average tax rate will be 22%, and his marginal tax rate will be 30%. How much does he need before tax?
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- You are in the 12% tax bracket and get a credit of $355. How much will the credit reduce your taxes?Kun is thinking about investing $4,000 at the end of each year for 30 years in a tax-sheltered retirement account that will earn 8.5 percent annually. How much will Kun’s account total over 30 years if the growth in the investment remains sheltered from taxes?Magdalena, age 35, has $72,000 accumulated in savings. She projects she will save $23,000 a year until her retirement at age 67. Her current cost of living is $100,000. In retirement, she will receive $31,704 per year in Social Security and $20,000 in pension, both in today’s dollars and both expected to rise by the rate of inflation. Her retirement cost of living is expected to decline by $6,000, in current dollars in the first year of retirement and thereafter grow at the projected inflation rate of 3%. Her projected annual investment return is 6%. a. Calculate her accumulated savings at retirement. b. Calculate her annual income, expenditures, and annual withdrawal for the first year of retirement. c. Develop a withdrawal rate. d. Does she meet the withdrawal rate method of deciding whether she will have sufficient funds to retire? If not, what do you recommend and why?
- Your friend is a higher rate taxpayer and has a large amount in a savings account which is earning 3% interest. He is worried that he will exceed the £500 of interest that he can earn free of tax as a higher rate taxpayer. Work out for him how much he would need to have in his savings account for a year before he exceeded the £500 limit.Brian would like to retire in 10 years when he turns 62. Based on his family history, Brian expects that he will live to be 108 years old. He wants to have enough money to replace 60% of his current income. Brian currently earns $150,000 per year. He expects to receive $10,000 per year from Social Security in today's dollars. Brian wants to assume an 8% annual investment rate of return before and during retirement and that inflation will average 4% annually. How much will Brian need to save at the end of each year from now until retirement, assuming he has current assets of $1,000,000 (round the lump sum investment capital need to2 decimal places)? a. $26,054 b. $32,788 c. $41,879 d. $55,5154. Suppose that Thomas Lee is enrolled in a defined contribution plan in which the employer contributes $8,000 each year. Thomas is earning $80,000 this year and his tax rate is 30 percent (which is not expected to change). Assume that the before- tax rate of return is 8 percent. (a)What is the additional amount of funds that Thomas will have when he reaches retirement in 10 years as a result of this year's service? (b) Suppose that Thomas's employer is planning to reduce half of their contribution to the defined contribution plan. Assume that Thomas would like to keep his retirement funds the same as they would have been with the defined contribution plan. If Thomas's only opportunity to save for retirement is in a nonqualified savings plan (no tax benefits), how much would Thomas need to receive in additional salary (which he would then save) to achieve his objective?
- Your grandparents are asking you for advice on when they should start collecting social security payments. If they wait until age 66, they will collect $2000 per month; but if they start collecting at age 62, they will collect $1500 per month. Assume they live to be 85, and simplify by assuming annual payments. (a) When do the higher payments catch up in total dollars received with the lower payment that starts earlier? (b) If their interest rate is 6%, which plan has a higher PW?Jordan wants to retire in 15 years when he turns 65. Jordan wants to have enough money to replace 75% of his current income less what he expects to receive from Social Security at the beginning of each year. He expects to receive $20,000 per year from Social Security in today's dollars. Jordan is conservative and wants to assume a 6% annual investment rate of return and assumes that inflation will be 4% per year. Based on his family history, Jordan expects that he will live to be 95 years old. If Jordan currently earns $100,000 per year and he expects his raises to equal the inflation rate, approximately how much does he need at retirement to fulfill his retirement goals? $2,285,195 $3,057,348 $1,268,887 $2,242,055Suppose that Thomas Lee is enrolled in a defined contribution plan in which the employer contributes $8,000 each year. Thomas is earning $80,000 this year and his tax rate is 30 percent (which is not expected to change). Assume that the before- tax rate of return is 8 percent. (a) What is the additional amount of funds that Thomas will have when he reaches retirement in 10 years as a result of this year's service? (b) Suppose that Thomas's employer is planning to reduce half of their contribution to the defined contribution plan. Assume that Thomas would like to keep his retirement funds the same as they would have been with the defined contribution plan. If Thomas's only opportunity to save for retirement is in a nonqualified savings plan (no tax benefits), how much would Thomas need to receive in additional salary (which he would then save) to achieve his objective?
- Marc has nothing saved for retirement. He wants to receive $46,000.00 per year for 5 years during retirement. The first of these payments will be received in 7 years. Marc can earn a return of 9.38 percent per year. How much does Marc need to save each year for 6 years to have exactly enough to meet his retirement goal if he makes his first annual savings contribution in 1 year and all savings contributions are equal? O $21,324.88 (plus or minus 10 dollars) O $25,513.05 (plus or minus 10 dollars) O $23,325.15 (plus or minus 10 dollars) O $20,819.31 (plus or minus 10 dollars) O none of the answers are within 10 dollars of the correct answerShelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 25 years old, and she will retire when she is 65. She wants to receive annual payouts for twenty years, and she wants those payouts to receive an annual COLA of 2.8%. (a) She wants her first payout to have the same purchasing power as does $14000 today. How big should that payout be if she assumes inflation of 2.8% per year? (b) How much money must she deposit when she is 65 if her money earns 8.1% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 30 before starting her ordinary annuity?Vernon has nothing saved for retirement. He wants to receive $46,000 per year for 5 years during retirement. The first of these payments will be received in 5 years. Vernon can earn a return of 15.30 percent per year. How much does Vernon need to save each year for 5 years to have exactly enough to meet his retirement goal if he makes his first annual savings contribution in 1 year and all savings contributions are equal? $19,578.62 (plus or minus 10 dollars) $26,027.99 (plus or minus 10 dollars) $22,574.14 (plus or minus 10 dollars) $20,014.80 (plus or minus 10 dollars) none of the answers are within 10 dollars of the correct answer