Finance - Sheryl and Carol work at the same company and make the same salary of $64,000 per year. Carol deposits 8% of their sal
ary into their 401k and the company matches 25 cents for every dollar up to 8%. Sheryl does not put any money away. If they are both in the 35% income tax bracket, how much more will Sheryl pay than Carol, assuming all other factors are equal? (401k plans are not immediately subject to income tax)
The problem statement tells you that the 8% of her salary that Carol puts in her 401(k) plan is not subject to income tax. Therefore, she is taxed on .08·64000 = 5120 less income than is Sheryl, so saves
