Question

Sherry, who is 52 years of age, opened a Roth IRA three years ago. She has contributed a total of $12,600 to the Roth IRA ($4,200 a year). The current value of the Roth IRA is $17,600. In the current year, Sherry withdraws $15,300 of the account balance to purchase a car. Assuming Sherry's marginal tax rate is 24 percent, how much of the $15,300 withdrawal will she retain after taxes to fund her car purchase

Answer 1

$14,382

Explanation:

The computation of the withdrawal amount is shown below:-

Amount Subject to tax= Amount of Withdrawal + Non-Taxable Amount

= $15,300 + $12,600

= $2,700

After Tax withdrawal Retained = Non-Taxable Amount - Tax - Penalty

= $12,600 + ($2,700 - ($2,700 × 24%) - ($2,700 × 10%))

= $12,600 + ($2,700 - $648 - $270)

= $14,382