What is John's effective salary reduction if he is in the 25% tax bracket?
A nonprofit organization offers a 5% salary contribution to John's 403b plan regardless of his own contributions, plus a matching 5% when John contributes 5% of his salary. John makes $56,000 a year.
A. $2,100
B. $2,800
C. $5,600
D. $8,400
A. $2,100
John contributes .05 × $56,000 = $2,800; his net contribution is $2,800(1 - .25) = $2,100.
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