he difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contrib withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but th t retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 yea live for an additional 20 years after retirement. . Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you c a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) Answer is complete but not entirely correct. s 20-year consumption stream (assuming monthly payouts) 27,462.69
he difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contrib withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but th t retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 yea live for an additional 20 years after retirement. . Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you c a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) Answer is complete but not entirely correct. s 20-year consumption stream (assuming monthly payouts) 27,462.69
Chapter15: Choice Of Business Entity—other Considerations
Section: Chapter Questions
Problem 94TPC
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