Joannie is in the 39.6 % tax bracket. She works for a company that matches 50% of employees' contributions to their 401 (k) retirement accounts. Joannie decides to add $2,000 to her account, which she expects to earn an average of 4% annually until she retires in twenty years. What is Joannie's return on the investment immediately upon making the deposit

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Business

Lillian

5 October, 13:41

Joannie is in the 39.6 % tax bracket. She works for a company that matches 50% of employees' contributions to their 401 (k) retirement accounts. Joannie decides to add $2,000 to her account, which she expects to earn an average of 4% annually until she retires in twenty years. What is Joannie's return on the investment immediately upon making the deposit

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Andreas Martinez · Answer 1

Joannie contributes $2,000 to her record. 50% of the venture is coordinated by the business, that is $1,000 is contributed. The normal yearly return is 4%. The period is 20 years. The tax rate is 39.6%.

Compute the immediate return.

Immediate return = Tax savings + Employer matching contribution

Immediate return = ($2,000 * 39.6%) + ($2,000 * 50%)

Immediate return = $792 + $1,000

Immediate return = $1,792

Compute the return on investment.

Return on investment = Immediate return / Amount invested by Joannie

Return on investment = $1,792 / $2,000

Return on investment = 0.896 or 89.6%