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jason works at xyz company. xyz company offers their employees a 401k matching contribution of 5% and a vesting period of 2 years. jason has a yearly salary of $80,000 and decided to have the following contributions to his 401k: year 1 - 4% of his pre-tax salary. year 2 - 5% of his pre-tax salary. year 3 - 7% of his pre-tax salary. after 3 years jason decides to switch jobs. assuming the market return is 0, what would be jason's 401k balance transfer to the new company?

User StilgarBF
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1 Answer

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Answer: Jason's balance is now $13,440.

Explanation: To calculate Jason's 401,000 balance, we need to find a match between his total donation and company.

First, let's calculate Jason's contribution each year.

Year 1: His 4% of $80,000 salary is 4% * $80,000 = $3,200.

Year 2: His 5% of $80,000 salary is 5% * $80,000 = $4,000.

Year 3: 7% of $80,000 salary is 7% * $80,000 = $5,600.

Year 1: Jason's 5% of his 4% contribution is his 5% * $3,200 = $160

Year 2: Jason's contribution for his 5% is 5% * $4,000 = $200

Year 3: Jason's 5% of his 7% contribution is 5% * $5,600 = $280.

Now you can add Jason's contribution and each year's company grant to get his total contribution. Year 1: $3,200 + $160 = $3,360 Year 2: $4,000 + $200 = $4,200 Year 3: $5,600 + $280 = $5,880

Finally, we can add up Jason's total donations for all his three years to get a balance of 401,000.

$3,360 + $4,200 + $5,880 = $13,440

Since Market Earnings is 0, Jason's 401,000 balance will be his $13,440, which can be carried over to his 401,000 plan at the new company if he changes jobs.

User Soyun
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