Question

Sammy made contributions to a Traditional IRA over the course of 26 working years. Her contributions averaged $3,500 annually. Sammy was in the 28% tax bracket during her working years. The average annual rate of return on the account was 7.5%. Upon retirement, Sammy stopped working and making IRA contributions. Instead, she started living on withdrawals from the retirement account. At this point, Sammy dropped into the 25% tax bracket. Factoring in taxes, what is the effective value of Sammy’s Traditional IRA at retirement? Assume annual compounding.

Answer 1

$186,672.02

$194,450.02

$229,450.03

$236,516.70