Xuan Chen, a forty-year-old, unmarried client has been contributing to an HSA for the last three years
Question:
Xuan Chen, a forty-year-old, unmarried client has been contributing to an HSA for the last three years using a salary reduction agreement through his employer. The stated effective annual rate on the account is 3 percent, and the interest is compounded monthly. The client is in the 24 percent marginal federal tax bracket and the 6 percent marginal state tax bracket. Use this information to answer the following questions.
a. How much money does Xuan currently have in the HSA if he has deposited $200 per month and has not made any withdrawals?
b. Because Xuan is in exceptionally good health, he is also using this account as an additional retirement savings vehicle. How much money will Xuan have in the account at age 65 if he maintains his current level of contribution?
c. How much will Xuan have at age sixty five if he contributes $2,850 every year?
d. How much will Xuan have at age sixty five if he contributes $2,850 every year if it is also assumed that the contribution and catch-up provision limits increases to 2.5 percent each year? (Ignore any minimum or maximum dollar change limitations.) Could you show me formulas of how to figure this out as well?
Federal Taxation 2016 Comprehensive
ISBN: 9780134104379
29th edition
Authors: Thomas R. Pope, Timothy J. Rupert, Kenneth E. Anderson