Traditional and Roth IRAs. with a traditional IRA, you get to deduct the amount you contribute from your current taxable income, invest the funds free from tax, but then pay taxes on the full amount you withdraw when you retire. Suppose your tax rate is 50% and you initially deposit $2000 in an IRA. The proceeds double in seven years to $4000. You then retire and pay taxes on the $4000 at your 50% rate. A. taking into account your tax deduction for the IRA, how much did your investment in the IRA really cost you? B. With a roth IRA, you do not get a deduction for your savings but the interest you earn is tax-free. Is the outcome for a roth IRA the same as for the traditional IRA if you invest $1000 for 7 years and double your investment. C. Suppose you believed that in seven years tax rates would be higher. Are the traditional and Roth IRAs still equivalent? If not, which would you prefer?