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. Factoring in taxes, what is the effective value of Lenny’s Traditional IRA at retirem

Question

anonymous · Answer

Assume annual compounding

anonymous · Answer

@ganeshie8 @*Scotto0715*

ganeshie8 · Answer

C = 2400
r = 0.065
t = 67-24

ganeshie8 · Answer

right ?

ganeshie8 · Answer

use the annuity formula and find out the accumulated amount

ganeshie8 · Answer

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

ganeshie8 · Answer

since this is annual compounding,
here, i = r/n = 0.0625/1 = 0.0625

ganeshie8 · Answer

plugin the numbers and evaluate

ganeshie8 · Answer

Future Value =   $\large 2400\bullet \dfrac{(1+0.065)^{67-24}-1}{0.065}$

ganeshie8 · Answer

you need to subtract taxes on above amount

anonymous · Answer

answer is $439,321.62

ganeshie8 · Answer

http://www.wolframalpha.com/input/?i=%28+2400+*+%5Cdfrac%7B%281%2B0.065%29%5E%7B67-24%7D-1%7D%7B0.065%7D%29*%281-.15%29