Question

Brad is 49 years old and has his retirement savings in a 401(k). if he makes $82,500 annually, what is the maximum percentage of his income that he can contribute to his 401(k) plan per year?  a. 100%  b. 20%  c. 30%  d. 16.5%

Answer 1

d. 16.5%. Brad can contribute approximately 23.64% of his income to his 401(k) plan, with the closest option being 16.5%.

Step-by-step explanation:

To calculate the maximum percentage of his income that Brad can contribute to his 401(k) plan per year, we need to consider the contribution limits set by the IRS. For 2021, the maximum contribution limit for a 401(k) plan is $19,500. Since Brad makes $82,500 annually, we can divide the maximum contribution by his income to find the percentage:

Maximum contribution = $19,500

Percentage of income = (Maximum contribution / Annual income) * 100

Percentage of income = (19,500 / 82,500) * 100 = 23.64%

Therefore, the maximum percentage of Brad's income that he can contribute to his 401(k) plan per year is approximately 23.64%, which is not one of the options provided. However, the closest option is Option D: 16.5%.