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Pre-Tax (Retirement Plan) versus After-Tax Savings
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This spreadsheet compares the present value of saving using
tax-deductible retirement plan contributions with the present value of saving
using after-tax investments. It
assumes you save and invest from current age until the age of 65. Distributions begin at age 70. If the "Advantage of Retirement Plan
Savings" is positive, it is more advantageous to utilize tax deductible
retirement plans. If the
"Advantage of Retirement Plan Savings" is negative, it is more advantageous to
utilize after-tax savings.
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Input
Variables:
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Current Age
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Pre-Tax Investment Return
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Are you subject to
the Medicare surtax?
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(Yes if MAGI is
above $200,000 for single filers or $250,000 for joint filers)
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Current Marginal Tax Rate (Federal and
State)
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Average Tax Rate
in Retirement (Federal and State) on Retirement Plan Distributions
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Doctor and Spouse
Annual Retirement Plan Contribution Amount
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Staff Annual
Retirement Plan Contribution Amount
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Annual Retirement
Plan Administrative Cost
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Results:
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A: Save using Tax Deductible Retirement Plan
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Total Annual Retirement Plan Contribution and Cost
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B: Save using After-Tax Dollars
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After-Tax Investment Return*
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Annual After-Tax Amount Available to Save
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Advantage (Disadvantage) of Retirement Plan Savings
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*Uses Pre-Tax investment return and assumes a
30% tax on investment gains (33.8% if subject to Medicare surtax)
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