Explore BrainMass

Explore BrainMass

    Accu,ulated Value - Before-tax Vs. After-tax Contributions

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What is the accumulated value of a $1,000 contribution to a qualified defined contribution plan under each of the circumstances described in the table below?

    Tax Rate Before-tax Rate of Return Investment Period
    10% 8% 5 years
    30% 8% 5 years
    30% 4% 5 years
    30% 4% 10 years

    Suppose instead that the $1,000 is paid to an employee who then invests the funds in a non-qualified account. What is the accumulated value under each of the circumstances in the table? Compare the results.

    © BrainMass Inc. brainmass.com June 4, 2020, 1:24 am ad1c9bdddf

    Solution Summary

    This solution illustrates how to compute the benefit of making before-tax contributions to a pension plan versus after-tax contributions.