Question 1173295: Suppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $4,500 tax free to your individual retirement account, IRA. The account earns 7% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 17%.
How much tax do you save (in $) each year by making the retirement fund contributions?
Answer by CPhill(1959)   (Show Source):
You can put this solution on YOUR website! You save $1,260 each year by making the retirement fund contributions. Here's how to calculate that:
* **Contribution:** $4,500
* **Tax Bracket:** 28%
* **Tax Savings:** $4,500 * 0.28 = $1,260
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