Question

please help.
Kevin made contributions to a Roth IRA over the course of 40 working years. His contributions averaged $3,000 annually. Kevin was in the 25% tax bracket during his working years. The average annual rate of return on the account was 7%. Upon retirement, Kevin stopped working and making Roth IRA contributions. Instead, he started living on withdrawals from the retirement account. At this point, Kevin dropped into the 15% tax bracket. Factoring in taxes, what is the effective value of Kevin’s Roth IRA at retirement? Assume annual compounding.

$449,179.01

$568,905.34

$580,905.34

$586,905.34

Answer 1

@tkhunny

Answer 2

@JimmyC

Answer 3

@amistre64

Answer 4

If it's math don't mention me :p

Answer 5

nooooooo :(

Answer 6

Kevin made contributions to a Roth IRA over the course of 40 working years.

His contributions averaged $3,000 annually.

Factoring in taxes, what is the effective value of Kevin’s Roth IRA at retirement? Assume annual compounding.

I believe that Roth IRAs are not taxed; and that this just amounts to a compounding anually of an annuity.

B = 3000(1-(1.07)^40)/(1-(1.07))

but this is just a guess at the moment

Answer 7

well, 598905 isnt a close option tho

Answer 8

what is effective value defined as?

Answer 9

i found a similar question that suggests this is correct, but without knowing how your text defines the process ...

Answer 10

These are just horrible questions. Not only are the "average" data confusing and not sufficiently helpful, but the information following retirement is entirely useless. Very strange problem statements.