Developing Cutting-Edge Technology for SV Inc

Developing Cutting-Edge Technology for SV Inc

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Developing Cutting-Edge Technology for SV Inc

Ch 13

1. Alicia has been working for JMM Corp. for 33 years. Alicia participates in JMM’s defined benefit plan. Under the plan, for every year of service for JMM she is to receive 2 percent of the average salary of her three highest years of compensation from JMM. She retired on January 1, 2019. Before retirement, her annual salary was $633,000, $663,000, and $693,000 for 2016, 2017, and 2018. What is the maximum benefit Alicia can receive in 2019

Maximum benefit in 2019?

2. Matthew (48 at year-end) develops cutting-edge technology for SV Inc., located in Silicon Valley. In 2019, Matthew participates in SV’s money purchase pension plan (a defined contribution plan) and in his company’s 401(k) plan. Under the money purchase pension plan, SV contributes 15 percent of an employee’s salary to a retirement account for the employee up to the amount limited by the tax code. Because it provides the money purchase pension plan, SV does not contribute to the employee’s 401(k) plan. Matthew would like to maximize his contribution to his 401(k) account after SV’s contribution to the money purchase plan

Assuming Matthew’s annual salary is $420,000,

 

1. a-1.What amount will SV contribute to Matthew’s money purchase plan?
2. a-2. What can Matthew contribute to his 401(k) account in 2019?

What amount will SV contribute to Matthew’s money purchase plan?

SV contribution to money purchase plan

What can Matthew contribute to his 401(k) account in 2019?

Matthews Contribution to 401K account

Assuming Matthew’s annual salary is $270,000,

 

1. b-1.What amount will SV contribute to Matthew’s money purchase plan?
2. b-2. What can Matthew contribute to his 401(k) account in 2019?

What amount will SV contribute to Matthew’s money purchase plan?

SV contribution to money purchase plan

What can Matthew contribute to his 401(k) account in 2019?

Matthews Contribution to 401K account

Assuming Matthew’s annual salary is $65,000,

 

1. c-1.What amount will SV contribute to Matthew’s money purchase plan?
2. c-2. What amount can Matthew contribute to his 401(k) account in 2019?

What amount will SV contribute to Matthew’s money purchase plan?

SV contribution to money purchase plan

What can Matthew contribute to his 401(k) account in 2019?

Matthews Contribution to 401K account

2019. Assume the same facts as part (c), except that Matthew is 54 years old at the end of 2019. What amount can Matthew contribute to his 401(k) account in 2019?

Matthew contribution to 401k account

3. John (age 60 and single) has earned income of $4,800. He has $36,100 of unearned (capital gain) income.
4. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2019?

Maximum deductible IRA contribution

1. If he does participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2019?

Maximum deductible IRA contribution

1. If he does not participate in an employer-sponsored plan, what is the maximum deductible IRA contribution John can make in 2019 if he has earned income of $13,900?

Maximum deductible IRA contribution

4. Michael is single and 35 years old. He is a participant in his employer’s sponsored retirement plan. How much can Michael contribute to a Roth IRA in 2019 in each of the following alternative situations?
5. Michael’s AGI before the IRA contribution deduction is $56,500. Michael contributed $3,500 to a traditional IRA.

Contribution to Roth IRA?

1. Michael’s AGI is $86,500 before any IRA contributions.

Contribution to Roth IRA?

1. Michael’s AGI is $127,500 before any IRA contributions.

Contribution to Roth IRA?

5. 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 $17,150. In the current year, Sherry withdraws $14,800 of the account balance to purchase a car. Assuming Sherry’s marginal tax rate is 24 percent, how much of the $14,800 withdrawal will she retain after taxes to fund her car purchase?

Amount of withdrawal

Non-taxable amount

Amount subject to tax

Tax rate %

Penalty rate%

Tax

Penalty

After tax withdrawal retained

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