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Suzie is twenty-five-years old, unmarried, and makes $50,000 per year at her job. She is in the 30 percent marginal federal tax bracket and the 7 percent marginal state tax bracket. Her company has a 401(k) plan that matches 50 percent of contributions up to 3 percent of her annual salary. Suzie determines that she can save 15 percent of her salary every year, and she will put all 20 percent ($10,000) away for retirement each year. She thinks that her taxes will be higher when she retires.

Application

a. Using the priority of money, which investment vehicles should she use and why?

b. How much did she save considering her savings, company match, and tax saving?

 

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