the TDA account is “Income taxes are paid on full amount of withdrawals”, so why the ending value is still 2,000,000. Isn’t is should be 2,000,000/(1-25%)?
Read the question text one more time carefully, my friend.
hi, thanks. I did read this part"she will need USD 3,000,000 (pretax) to purchase the annuity". but doesn’t this mean she need another 2,000,000(3,000,000-1,000,000) to pay the annuity. so she needs to have 2,000,000 after taking the amount of 2,666,667 and paid the tax of 666,667. What the pretax means here?
It means that she needs 3M BEFORE she has paid any tax. It does not say how much the annuity costs. There are several cases in the CFAI text where it says X needs a GROSS salary of, say, 200K/year to… It means that his pre-tax salary needs to be 200K/yr (i.e., before he has paid any tax to the government)
this post enlightened me. Thanks.