The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement. a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in 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. 20-year consumption stream (assuming monthly payouts) $ 826.29 X
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- The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement. a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) 20-year consumption stream (assuming monthly payouts) _________________ b. What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? (Round your answers to 2 decimal place.) 20-year consumption stream (assuming monthly payouts)_________________The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement. a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.) b. What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? (Round your answers to 2 decimal place.)The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement.a. Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%.b. What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? c. Which provides better expected results if you expect your tax rate to decrease from 30% today to 25% at retirement?
- An Individual Retirement Account (IRA) is an account in which the saver does not pay income tax on the amount deposited but is not allowed to withdraw the money until retirement. (The saver pays income tax at that point, but his or her tax bracket is much lower then.)Marlene Silva wishes to have an IRA that will be worth $100,000 when she retires at age 65. (Round your answers to the nearest cent.) (a) How much must she deposit at age 34 at 8 3/8% compounded daily? $ (b) If, at age 65, she arranges for the monthly interest to be sent to her, how much will she receive each thirty-day month?In the following ordinary annuity, the interest is compounded with each payment, and the payment is made at the end of the compounding period.An individual retirement account, or IRA, earns tax-deferred interest and allows the owner to invest up to $5000 each year. Joe and Jill both will make IRA deposits for 30 years (from age 35 to 65) into stock mutual funds yielding 9.8%. Joe deposits $5000 once each year, while Jill has $96.15 (which is 5000/52) withheld from her weekly paycheck and deposited automatically. How much will each have at age 65? (Round your answer to the nearest cent.) Joe $ Jill $[The following information applies to the questions displayed below.] Yuki (age 45 at year-end) has been contributing to a traditional IRA for years (all deductible contributions), and her IRA is now worth $50,000. She is trying to decide whether she should convert her traditional IRA into a Roth IRA. Her current marginal tax rate is 24 percent. She plans to withdraw the entire balance of the account in 20 years, and she expects to earn a before-tax rate of return of 5 percent on her retirement accounts and a 4 percent after-tax rate of return on all investments outside of her retirement accounts. For each of the following alternative scenarios, indicate how much more or less Yuki will accumulate after taxes in 20 years if she converts her traditional IRA into a Roth IRA. Be sure to include the opportunity cost of having to pay taxes on the conversion. Note: Round your intermediate calculations and final answers to the nearest whole dollar amount. a. When she withdraws the…
- You have $3,000 of after-tax income that you invest in a Traditional IRA. Recall that contributions to Traditional IRAs are tax deductible, i.e., you are investing pre-tax dollars. The investment earns a 10% return and you will withdraw the money as a lump-sum in 30 years while in retirement (after age 59.5). Your current marginal tax rate is 30% and your marginal tax rate in retirement will be 20%. How much will be your after-tax withdrawal? Group of answer choices $59,827 $41,879 $74,783 $36,644You have $3,000 of after-tax income that you invest in a Traditional IRA. Recall that contributions to Traditional IRAs are tax deductible, i.e., you are investing pre-tax dollars. The investment earns a 10% return and you will withdraw the money as a lump-sum in 30 years while in retirement (after age 59.5). Your current marginal tax rate is 30% and your marginal tax rate in retirement will be 20%. How much will be your after-tax withdrawal?John is trying to decide whether to contribute to a Roth IRA or a traditional IRA. He plans on making a $5,000 contribution to whichever plan he decides to fund. He currently pays tax at a 32 percent marginal income tax rate, but he believes that his marginal tax rate in the future will be 28 percent. He intends to leave the money in the Roth IRA or traditional IRA for 30 years, and he expects to earn a 6 percent before-tax rate of return on the account. (Use Table 1.) Note: Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. Problem 13-78 Part b (Static) b. How much will John accumulate after taxes if he contributes to a traditional IRA (consider only the funds contributed to the traditional IRA)?
- When taxpayer receive distribution from qualified retirement plans, how many time is allowed to roll over the amount received into a new plan to avoid paying taxes on the distribution in the current year, assuming there are no unusual events? 60 days 1 year 180 days d 90 day There is no time limitBelow is the Old Age Security (OAS) pension recovery tax table (also known as the OAS clawback table). Use the following information to respond to Lionel's OAS question. Lionel is 75 years old and receives an OAS monthly pension of $778.45. As he is on a tight retirement budget, he is concerned about the OAS clawback. He knows that the clawback for repayment is 15% of the difference between his net income of $98, 459 and the minimum threshold amount. Lionel wants to know how much of his OAS that he would get to keep after the OAS clawback. Ignore taxes.The Jeffersons are considering contributing to their traditional IRAs this year. They have also heard an expert on PBS say that Roth IRAs may be appropriate for them. They want to know: Should they contribute to a traditional IRA, a Roth IRA, both types of IRA accounts, or neither IRA account? (If you select neither IRA account, you must recommend an alternative retirement account to start saving for retirement.) How much can they contribute to an IRA this year? Explain your choice addressing the major tax advantages of the contribution strategy that is most appropriate. What tax rules should the client be aware of regarding contributions and distributions? Cover how contributions, earnings and withdrawals are taxed at various ages and situations important to the Jeffersons.