Jackie earns $5,000 a month in taxable income. Her financial advisor is trying to talk her into contributing $500 a month into her 401K rather than putting the money into a regular account.
He explains to her that the contribution into the 401K is made with pre-tax dollars and would
Leave her with more spending money. Both investments are equally risky, and she can earn an
8% return on each. Her tax rate is 28%. If Jackie invests the money through her 401K rather
Than through a regular account , how much more would she have to spend each month in
After-tax dollars?

Question

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The Answer of Jackie earns $5,000 a month in taxable income. Her financial advisor is trying to talk her into contributing $500 a month into her 401K rather than putting the money into a regular account.
He explains to her that the contribution into the 401K is made with pre-tax dollars and would
Leave her with more spending money. Both investments are equally risky, and she can earn an
8% return on each. Her tax rate is 28%. If Jackie invests the money through her 401K rather
Than through a regular account , how much more would she have to spend each month in
After-tax dollars?

Jackie Earns $5,000 a Month in Taxable Income