Question
An investor feels she can afford to save a constant real amount of $7,500 per year (after taxes and in 2018$) in a tax sheltered
An investor feels she can afford to save a constant real amount of $7,500 per year (after taxes and in 2018$) in a tax sheltered IRA account for 35 years. Assume that iRBT = 0.05, f = 0.04, and T = 0.35 in their savings years and that iRBT = 0.03, f = 0.04, and T = 0.25 during their retirement years. At retirement, all but $10,000 of her IRA account is taxable and she plans to amortize accumulated savings over 30 years with constant real payments. How much would she need to save per year in an account where the 30% of accrued interest is taxed annually if she wished to fund the same after-tax standard of living that her before tax savings plan is expected to generate. Assume that the taxed savings plan generates the same before-tax rates as her IRA plan.
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