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Earl and Lamy each begin full time jobs in January 2009 and plan to retire in January 2033 after working for 24 years. Each man
Earl and Lamy each begin full time jobs in January 2009 and plan to retire in January 2033 after working for 24 years. Each man is in a 40% marginal tax bracket Assume that any money they deposit into IRAs earns 6% interest compounded annually. Answer parts (a) through (d) below. (a) Suppose Earl opens a Roth IRA account immediately. Earl deposits the remainder of $5000 after taxes are deducted into his account at the end of each year for 6 years. After that he makes no further deposits and lets the money eam interest. How much money will Earl have in his account when he retires in January 2033? (Do not round until the final answer. Then round to the nearest cent as needed.) (b) Suppose Larry waits 6 years before opening his Roth IRA. He deposits the remainder of S5000 after taxes are deducted into the account at the end of each year until he retires. How much money will Larry have in his account when he retires in January 2033? (Do not round until the final answer. Then round to the nearest cent as needed.) (c) Choose the correct answer below. Who paid the most money to his IRA? O Earl paid the most money O Earl and Larry paid the same amount. Larry paid the most money. (d) Choose the correct answer below. Who had the most money in his account upon retirement? O Larry had the most money upon retirement. O O Earl had the most money upon retirement. Earl and Larry had the same amount of money upon retirement. Click to select your answers)
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