Luke is a young professional in his early 30s. He is considering whether to put money in
Question:
Luke is a young professional in his early 30s. He is considering whether to put money in the traditional IRA or Roth IRA. This year’s IRA contribution limit for Luke is $6,000 for the combined amount of traditional and Roth contributions. Luke wants to contribute as much money to his IRA as possible. Although he knows his taxable income and his marginal income tax rate in this year, he is uncertain about his taxable income after retirement and his marginal income tax rate at that time. So, he also needs to account for this tax uncertainty. Which of the followings is likely to be the best IRA contribution strategy for Luke in this year?
Group of answer choices
a. Make $6,000 contribution to traditional IRA and $0 contribution to Roth IRA.
b. Make $0 contribution to traditional IRA and $6,000 contribution to Roth IRA.
c. Make contributions to both traditional IRA and Roth IRA. The combined contribution is $6,000, and more money goes to the traditional IRA than the Roth IRA.
d. Make contributions to both traditional IRA and Roth IRA. The combined contribution is $6,000, and more money goes to the Roth IRA than the traditional IRA.
Personal Financial Planning
ISBN: 978-1305636613
14th edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk