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Leroy does not have a retirement plan at work. Suppose he has $6,000 in cash to invest in a traditional IRA this year, and will
Leroy does not have a retirement plan at work. Suppose he has $6,000 in cash to invest in a traditional IRA this year, and will invest the tax savings into a taxable account for retirement. His tax rate is 25%, so he can invest $1,500 into the taxable account. If Leroy is 30 and wants to withdraw the money at age 65, and can earn a 4% annual return pretax, what is his after-tax spending power at age 65? Assume his tax rate is constant at 25% throughout his life. $20,093 $22,316 $23,677 $21,978 $19,672
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