11.10 Your tax liability is 40% of your salary of $100,000. For every $1,000 earned, $400 ($1,000...
Question:
11.10 Your tax liability is 40% of your salary of $100,000. For every $1,000 earned, $400
($1,000 × 0.40) goes toward taxes and $600 ($1,000 − $400) is take-home pay.
All 401(k) contributions are on a pretax basis. Therefore, if you contribute $1,000 to a 401(k) and your employer matches $1,000, then $2,000 is added to your retirement fund, for what would have been only $600 in take-home pay. This is an immediate return on investment (ROI) of 333%.
If your tax liability is 30% of your salary of $50,000:
a. For every $1,000 earned, how much goes toward taxes?
b. How much of the $1,000 is take-home pay?
c. If you contribute $2,000 to your 401(k) and your employer matches $2,000, how much is added to your retirement that year?
d. How much will your $2,000 contribution to your 401(k) affect your take-home pay for the year?
e. What is your immediate ROI given your decision to contribute $2,000 to your 401(k)?
Step by Step Answer:
Personal Finance Building Your Future
ISBN: 9780077861728
2nd Edition
Authors: Robert Walker, Kristy Walker