4. Calculating the effects of investing pretax or after-tax dollarsin accounts that are or are not tax sheltered Jen just started learning about options for saving for her retirement. Her friend is a big fan of tax-sheltered accounts. pre-tax dollars? non-tax- sheltered after-tax dollars? accounts? under the tax-sheltered accounts? mattress? Why do you suppose that is? Check all that apply. Funds can be withdrawn at any time for any reason without penalty or tax payments. Earnings are tax-deferred as long as they are reinvested within the account. Some withdrawals may be tax-free. Investments are always safer in a tax-sheltered account. Before she commits any money to an account, Jen wants to see how much her savings would earn using different investment tactics. (For now dy Tools Tips Ch 17: Assignment - Retirement and Estate Planning Some withdrawals may be tax-free. Investments are always safer in a tax-sheltered account. Before she commits any money to an account, Jen wants to see how much her savings would earn using different investment tactics. (For assume there are no limitations or restrictions on her retirement contributions.) She asked you to help and provided the following informat Tips She plans to invest 6,000 every year for 40 years. She has found an investment account that ears 5% per year. She is in a 20% income tax bracket. Interest Factors-Future Value of an Annuity Years 2% 3% 4% 5% 10 10.9497 11.4639 12.0061 12.3779 11 12.1687 12.8078 13.4864 14.2068 12 13 14 15 16 18.6393 20.1569 17 18 19 20 21 22 23 24 32.4529 36.6179 41.4305 30.4219 34.4265 39.0826 44.5020 13.4121 14.1920 15.0258 15.9171 14.6803 15.6178 16.6268 17.7130 15.9739 17.0863 18.2919 19.5986 17.2934 18.5989 20.0236 21.5786 21.8245 23.6575 20.0121 21.7616 23.6975 25.8404 21.4123 23.4144 25.6454 28.1324) 30.5390 22.8406 25.1169 27.6712 24.2974 26.8704 29.7781 33.0660 25.7833 28.6765 31.9692 35.7193 27.2990 30.5368 34.2480 38.5052 28.8450 25 38 26 32.0303 36.4593 41.6459 47.7271 33.6709 38.5530 44.3177 51.1135 Ch 17: Assignment - Retirement and Estate Planning 30 40.5681 47.5/54 56.0849 66.4389 40 60.4020 75.4013 95.0255 120.7998 Using the previous table, complete the following table to show Jen the effect of different options that are available to her. Round your answers: to the nearest dollar. Jen's Options After-Tax Nonsheltered After-Tax Sheltered Pretax Sheltered Annual investment $6,000 $6,000 $6,000 Number of years to invest 40 40 40 Interest offered by account (as a %) 5 5 5. Effective interest for Jen (as a %) Interest factor from table Accumulated over 40 years $ Invested over 40 years S $ Income tax bracket (as a %) 20 20 20 Income tax saved per year S $ $ $ Income tax saved over 40 years Your findings Jen's friend's fondness for tax-sheltered accounts, because, according to this analysis, they effectively earn nonsheltered accounts. Using only the factors taken into account in this analysis, Jen concludes that the because it's the only one that would save her $ in income taxes every year. account is the best, in part, Jen is tempted to use the money she would have sent to the IRS for fun but wants to know how much more she could earn if she put it toward her annual investment. First, she computes that her new annual investment would be $ Next, Jen applies the interest factor from the table of to reach an accumulated total of $