A regular retirement plan requires that taxes be paid at the time the money is removed from the plan. What is the after-tax value of a $6000 deposit into a retirement plan today that generates an 7% return for 20 years if the investor is taxed at the 24% level?

Question

Quizplus · Accepted Answer

FV(6000) = $6,000 × (1 + 0.07)20 = $23,218.
after-tax = $23,218 × (1 − 0.24) = $17,646
Calculator entries are N = 20, I/Y = 7, PV = −6,000, PMT = 0, CPT FV → 23,218.11 before taxes.
Value after-taxes = $23,218.11(1 − 0.24) = $17,646

A Regular Retirement Plan Requires That Taxes Be Paid at the Time