Employees salary into a retirement account

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Reference no: EM131238236

1. Tom earns $20 per hour for up to 40 hours of work each week. He is paid $30 per hour for every hour in excess of 40. Tom faces a 10 percent tax rate and pays $5 per hour in child care expenses for each hour he works. Tom receives $100 in child support payments each week. There are 110 (non-sleeping) hours in the week. Graph Tom’s weekly budget line.

2. Currently a firm pays 10% of each employee’s salary into a retirement account, regardless of whether the employee also contributes to the account. The firm is considering changing this system to a 10% match, meaning that the firm will match, up to 10% of each employee’s salary, the employee’s contributes into the account. Some people at the firm think this change will lead employees to save more and therefore to be able to afford to retire, while others at the firm believe this will lead employees to have less retirement savings and therefore be less able to afford to retire. Will workers be better off or worse off?

Reference no: EM131238236

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