Brandon wants to retire in 42 years. He makes annual contributions to a Traditional IRA in the amount of $2,200. He is taxed at 33% today, but anticipates that will change to 15% in his retirement. If the average annual rate of return on the account is 4.9%, what is the effective value of Brandon’s IRA account when he retires?
@ganeshie8

Question

Brandon wants to retire in 42 years. He makes annual contributions to a Traditional IRA in the amount of $2,200. He is taxed at 33% today, but anticipates that will change to 15% in his retirement. If the average annual rate of return on the account is 4.9%, what is the effective value of Brandon’s IRA account when he retires? 
@ganeshie8

ganeshie8 · Answer

annuity setup

ganeshie8 · Answer

do u have the formula for future value ?

anonymous · Answer

no

ganeshie8 · Answer

one sec, let me pull up my notes

ganeshie8 · Answer

$\large FV  =   C\bullet \frac{(1+i)^{nt}-1}{i}$

ganeshie8 · Answer

plug the numbers and find out the future value,
we can subtract the tax to get the effective value

ganeshie8 · Answer

C = periodic cash payments =  2200
i =  r/n  =  0.049/1 = 0.049
n = 1
t = 42

ganeshie8 · Answer

plugin

ganeshie8 · Answer

once u have the FV, simply subtract the tax of 15% of the FV

ganeshie8 · Answer

im getting late for dinner.... brb