For:
13,000 contribution per year
post retirement tax rate of 15%
earning 6% yearly
for 40 yrs
calculate the contribution of post tax retirement fund (like a Roth Ira)
thank you
thank you
To calculate the contribution of a post-tax retirement fund like a Roth IRA, we first need to understand how a Roth IRA works. The contributions to a Roth IRA are made with after-tax income, meaning the money you contribute has already been taxed. However, the earnings on the contributions grow tax-free and can be withdrawn tax-free in retirement.
Given the information you provided, we can break down the process to calculate the contribution of a post-tax retirement fund:
Step 1: Calculate the total contributions over 40 years.
You mentioned a contribution of $13,000 per year for 40 years, so the total contributions over this period would be:
Total Contributions = Annual Contribution x Number of Years
Total Contributions = $13,000 x 40 = $520,000
Step 2: Calculate the tax paid on the contributions.
Since a Roth IRA is funded with after-tax dollars, you don't need to calculate the tax paid on the contributions. In this case, the tax rate doesn't affect the contributions directly.
Step 3: Calculate the earnings on the contributions.
You mentioned an annual earning rate of 6% over the 40-year period. To calculate the earnings on the contributions, we can use the formula for compound interest:
Earnings = Principal x (1 + Interest Rate)^Number of Years - Principal
In this case, the principal is the total contributions made to the Roth IRA, which is $520,000. Plugging in the values into the formula, we get:
Earnings = $520,000 x (1 + 0.06)^40 - $520,000
Step 4: Calculate the post-tax retirement fund.
To calculate the post-tax retirement fund, we add the total contributions to the earnings calculated in step 3. Since a Roth IRA allows for tax-free withdrawals, the earnings are not subject to taxation in retirement.
Post-Tax Retirement Fund = Total Contributions + Earnings
Post-Tax Retirement Fund = $520,000 + Earnings
Now you can substitute the value of the earnings calculated in step 3 to find the final answer.