Question

Financial Algebra .

Answer 1

Sabina made contributions to a Traditional IRA over the course of 32 working years. Her contributions averaged $2,700 annually. Sabina was in the 24% tax bracket during her working years. The average annual rate of return on the account was 6.5%. Upon retirement, Sabina stopped working and making IRA contributions. Instead, she started living on withdrawals from the retirement account. At this point, Sabina dropped into the 20% tax bracket. Factoring in taxes, what is the effective value of Sabina’s Traditional IRA at retirement? Assume annual compounding.

$249,303.19

$236,838.03

$216,072.42

$205,268.80