Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Need more help please Yuki (age 45 at year-end) has been contributing to a traditional IRA for years (all deductible contributions), and her IRA is

Need more help please

Yuki (age 45 at year-end) has been contributing to a traditional IRA for years (all deductible contributions), and her IRA is now worth $49,000. She is trying to decide whether she should roll over her traditional IRA into a Roth IRA. Her current marginal tax rate is 25 percent. She plans to withdraw the entire balance of the account in 20 years and she expects to earn a before-tax rate of return of 5.9 percent on her retirement accounts and a 4.9 percent after-tax rate of return on all investments outside of her retirement accounts. For each of the following alternative scenarios, indicate how much more or less Yuki will accumulate after taxes in 20 years if she rolls over her traditional IRA into a Roth IRA. Be sure to include the opportunity cost of having to pay taxes on the rollover. (Round "Future value factor" to 4 decimal places. Round final answers to the nearest whole dollar amount.)

a.

When she withdraws the retirement funds in 20 years, she expects her marginal tax rate to be 35 percent.

b.

When she withdraws the retirement funds in 20 years, she expects her marginal tax rate to be 20 percent.

c.

Assume the same facts as in part (b), except that she earns a 3.9 percent after-tax rate of return on investments outside of the retirement accounts.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Accounting Principles Understanding Important Terms And Principles Of Accounting

Authors: Lyndsay Sudduth

1st Edition

B0B5KV57NJ, 979-8840104033

More Books

Students also viewed these Accounting questions

Question

Are my points each supported by at least two subpoints?

Answered: 1 week ago