The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed, but the withdrawals at retirement are tax$-$free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $$5,000$ to retirement savings in each year. You will retire in $30$ years and expect to live for an additional $20$ years after retirement.

Required:

Assume the before$-$tax interest rate is $5\%.$ What will be your after$-$tax $20-$year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at $30\%.$

What will be your $20-$year retirement consumption stream if you choose to save in a Roth IRA?

Which provides better expected results if you expect your tax rate on wage as well as all investment income to decrease from $30\%$ today to $25\%$ at retirement?