If your tax liability is 30% of your $50,000 salary and you contribute $2,000 to your 401(k)and your employer matches $2,000,what is your immediate ROI upon your decision to contribute $2,000 to your 401(k)?

Question

Quizplus · Accepted Answer

The immediate ROI is calculated by the employer's match divided by your contribution. The employer matches $2,000, and you contribute $2,000, so the ROI is ($2,000 / $2,000) * 100% = 100%. However, since the tax liability is reduced by the contribution, the effective ROI is higher, calculated as ($2,000 match + $600 tax savings) / $2,000 contribution = 130%.

If Your Tax Liability Is 30% of Your $50,000 Salary