In 2017, Nitai (age 40) contributes 10 percent of his $100,000 annual salary to
ID: 2518229 • Letter: I
Question
In 2017, Nitai (age 40) contributes 10 percent of his $100,000 annual salary to a Roth 401(k) account sponsored by his employer, AY Inc. AY Inc. 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 7 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, Table 3, Table 4.) (Round "Future value factor" to 4 decimal places. Round intermediate calculations and final answers to the nearest dollar amount.) Roth 401(k)Traditional 401(k) Contribution Future value factor Future value of contribution Taxes payable on distribution After tax proceeds from distributionExplanation / Answer
Roath 401K Traditional 401k Contribution $100,000 $100,000 Future Value Factor 5.4274 5.4274 Future Value of Contribution $542,740 $542,740 Taxes Payable on Distribution 0 $162,822 After Tax Proceeds $542,740 $379,918