Carey Merle is ready to retire next year at age 60. Carey, a lifetime accountant, has been working as a bookkeeper at XYZ LLP for the last 25 years, and after helping her three kids pay for college, she has some savings in a retirement account. Although Carey is an experienced bookkeeper and reminds clients to think ahead, she admittedly has not put any thought into how she would like to use her savings. Her most recent statement indicates there is currently $400,000 saved in the account.

1. One of her daughters suggested taking the entire sum when she retires and investing them on her own. Funds would be subject to a personal tax of 35 percent if withdrawn from the account.
2. Carey’s youngest daughter suggested taking half of the retirement funds right away to travel and enjoy while receiving the rest as an annuity over the next ten years. The initial withdrawal would be at a tax rate of 35 percent and the annuity at 15 percent.
3. Carey’s oldest daughter gently reminded Carey that her parents lived until well over 80 and suggested a more conservative approach. Carey could receive an annuity of $35,000 for 20 years. A personal tax rate of 15 percent would apply.
4. Carey could receive an annuity of $31,000 a year for 25 years. A personal tax rate of 15 percent would apply.

Calculate the after-tax proceeds for all four options. What is the best option for Carey? 

Answer rating: 100% (QA)

Galeulahon 9 After dax pnceeds in each g the ophionm ophon i Enre amant is withdsaon from ... View the full answer