In: Economics
Please review all of the course materials regarding Financial Markets: Savings and Investment Vehicles before you begin this assignment. You will also need to reference the Tax Cuts and Jobs Act of 2017 Links to an external site..
The questions below also rely on the following assumptions:
**Calculate the total amount of funds that you expect to be in your 401(k) at the end of three years. Explain your answer.
**At the end of the third year, you decide to withdraw $15,000 from your 401(k) to pay for some home improvements. Calculate how much tax, if any, you will owe on this withdrawal. Explain your answer.
Yearly Pay = $100,000
Yearly Interest in 401(k) = 4% of gross wage= 4% X $100,000= 4/100 X100,000= $4,000
Yearly commitment be Manager = 4% of Gross Wage= $4,000.
Along these lines complete yearly venture = $8,000
1.)So all out speculation will be $8,000 X3 = $24,000.
Yearly return is 5%. So for first $8,000 return will be determined for a long time, for next $8,000 return will be determined for a long time and for last $8,000 return will be determined for 1 year.
So all out return= 8000X5%X3 + 8000 X 5% X2 + 8000 X 5% X1= 8000 x 5% X(3+2+1)= 8000X 5%X6 =8000X(5/100)X6= $2,400
Along these lines complete venture + Return = $24,000 + $2,400 = $26,400
2.) Sum pulled back is $15,000. Since 401(K) is a retirement plan not venture, you just need to make good on salary regulatory obligation on it not capital addition charge. So on these $15,000 widhdrawal 24% duty will be paid which is equivalent to $15,000 X 24%= 15,000 X24/100= 150X24= $3,600.
Accordingly complete duty of $3,600 must be paid.(Only inclome charge, no capital increase charge)