Question

Finance question?

Answer 1

Jeannette made contributions to an IRA over the course of 35 working years. Her contributions averaged $15,000 annually. Jeannette was in the 24% tax bracket during her working years. The average annual rate of return on the account was 7.5%, bringing the value of the IRA to $2,313,774.08 by the time she retired. At this point, Jeannette stopped working and making IRA contributions, and instead started living on withdrawals from the retirement account. Jeannette dropped into the 18% tax bracket at retirement. What is the difference in the taxes Jeannette would pay on this account over time between a Traditional and Roth IRA?

Answer 2

its Algebra with financial apps

Answer 3

Traditional IRA pays taxed during withdrawal time
Roth IRA pays in the start itself.

Answer 4

What do you mean by pays in the start itself?

Answer 5

good question :)

when u pay 15,000 to the account itself, u pay the tax also

Answer 6

so, with Roth IRA, you dont need to pay tax during withdrawals, cuz the money contributed to Roth IRA account is pre-taxed money

Answer 7

However in Traditional IRA, you dont pay tax in the beginning. You will be paying tax when u do withdrawals after u retire.

Answer 8

lets see the difference

Answer 9

Tax using traditional IRA = 18% of withdrawal amount
= \(2,313,774.08\times 0.18 \)
= \(?\)

Answer 10

416,479.3344

Answer 11

Tax using Roth IRA = 24% during each payment time, for 35 years
= \(15,000 \times 0.24 \times 35 \)
= \(?\)

Answer 12

126,000

Answer 13

yes, take the difference

Answer 14

$290,479.33!

Answer 15

Thank you sooo much :)

Answer 16

u wlc :) so which one is better for ur retirement ?

Answer 17

I say Roth because the taxes are less

Answer 18

very intelligent :)