Question
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year
Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 6% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 17%.
(a)How much tax do you save (in $) each year by making the retirement fund contributions?
(b)Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.)
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