Question

Lenny started making contributions to a Traditional IRA when he got his first job, at age 24. His contributions averaged $2,400 annually. Lenny was in the 25% tax bracket during his working years, when he continued to make these annual contributions. The average annual rate of return on the account was 6.5%. Upon retirement at age 67, Lenny stopped working and making IRA contributions. Instead, he started living on withdrawals from the retirement account. At this point, Lenny dropped into the 15% tax bracket.

Answer 1

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

$110,883.44

$387,636.72

$439,321.62

$501,368.96