Answer:
A) Your own Contribution in 401(K) is $12,000.
B) Total Value of fund after one year = $21,000 × (1 + 12%)
= $23,520.
Explanation:
A) Total Annual Income = $120,000
Contribution in 401(K) = 10% of income
= $120,000 × 10%
= $12,000
your own Contribution in 401(K) is $12,000.
Employee contribution after tax = $12,000 × (1 31%)
= $8,280
Contribution of employer = $12,000 × 75%
= $9,000
Total Contribution = $12,000 + $9,000
= $21,000
Total Contribution in one year is $12,000.
Yield on fund = 12%
Total Value of fund after one year = $21,000 × (1 + 12%)
= $23,520.
after tax return = ($23,520 -$8,280) / $8,280
= 184%
After tax return is 184%.
You don't have to pay that income tax until you withdraw the money
