v*15 %=



v&+R

v

=





8

0

 

 



Taxes at 15% of interest.

Subtracts taxes from total FV to calculate after-tax

FV.

Stores after-tax future value in FV.

Calculates present-value purchasing power of the above after-tax FV at 8% inflation rate.

Value of a Taxable Retirement Account

See appendix F for RPN keystrokes for this example.

This problem uses the TVM menu to calculate the future value of a taxable retirement account that receives regular, annual payments beginning today (Begin mode). The annual tax on the interest is paid out of the account. (Assume the deposits have been taxed already.)

N= the number of years until retirement.

I%YR = the annual interest rate diminished by the tax rate: interest rate ⋅ (1－tax rate).

PV = the current amount in the retirement account. PMT = the amount of the annual payment.

FV = the future value of the retirement account.

Example: Taxable Retirement Account. If you invest $3,000 each year for 35 years, with dividends taxed as ordinary income, how much will you have in the account at retirement? Assume an annual dividend rate of 8.175% and a tax rate of 28%, and that payments begin today. What will be the purchasing power of that amount in today’s dollars, assuming 8% annual inflation?

208 14: Additional Examples

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