Question

Using the chart below, determine the total taxes owed for someone with an annual income of $155,000.00.​

Answer 1

Answer:

1. $31,279.50
2. $1,450,000

Step-by-step explanation:

1.

The tax on $155,000 is computed by adding the tax due in each bracket.

  total tax = (0.24)(155,000 -85,525) +(0.22)(85,525 -40,125) +(0.12)(40,125 -9,875) +(0.10)(9,875)

  = (0.24)(155,000) +(85,525)(-0.24 +0.22) +(40,125)(-0.22 +0.12) +(9,875)(-0.12 +0.10)

  = 0.24(155,000) -(0.02(85,525) +0.10(40,125) +0.02(9,875))

  = 37,200 -(1710.50 +4012.50 +197.50) = 37,200 -5920.50

  = 31,279.50

Taxes owed on $155,000 are $31,279.50.

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2.

The 80% rule says your retirement income should replace 80% of your pre-retirement income. If W is your pre-retirement annual wage, your retirement need is expected to be 0.80×W.

The 4% rule says your first-year withdrawal should be about 4% of your retirement savings (S). That is, we want ...

  0.80×W = 0.04×S

Solving for S, we find ...

  S = W×(0.80/0.04) = 20W

If the annual gross wage is 72,500, the retirement savings needed is predicted to be ...

  S = 20(72,500) = 1,450,000

Total retirement savings needed is $1,450,000 using these rules.