Question

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Tim has worked for one employer his entire career. While he was working, he participated in the employer's defined contribution plan [traditional 401(k)]. At the end of 2022, Tim retires. The balance in his defined contribution plan at the end of 2021 was $2,000,000. (Use Exhibit 13-3.)
Note: Leave no answers blank. Enter zero if applicable.
d. Assuming that Tim is 76 years old at the end of 2022 and his marginal tax rate is 32 percent, what amount of his distribution will he have remaining after taxes if he receives only a distribution of $50,000 for 2022?

Answer 1

After calculating the taxes on a $50,000 distribution from Tim's 401(k) with a marginal tax rate of 32 percent, Tim will have $34,000 remaining after taxes.

Step-by-step explanation:

The question asks about how much money Tim will have remaining after taxes if he receives a distribution of $50,000 from his traditional 401(k) at the age of 76, with a marginal tax rate of 32 percent. First, we calculate the amount of taxes Tim would pay on the $50,000 distribution:

Tax amount = Distribution × Tax rate = $50,000 × 0.32 = $16,000

Next, we subtract the tax amount from the distribution to find out how much Tim will have left after taxes:

Amount remaining after taxes = Distribution - Tax amount = $50,000 - $16,000 = $34,000

Therefore, Tim will have $34,000 remaining after accounting for the taxes on his distribution.