John is trying to decide whether to contribute to a Roth IRA or a traditional IRA. He plans on making a $5,000 contribution to whichever plan he decides to fund. He currently pays tax at a 30 percent marginal income tax rate but he believes that his marginal tax rate in the future will be 28 percent. He intends to leave the money in the Roth IRA or traditional IRA accounts for 30 years and he expects to earn a 6 percent before-tax rate of return on the account.

a) How much will John accumulate after taxes if he contributes to a Roth IRA

(consider only the funds contributed to the Roth IRA)?

b) How much will John accumulate after taxes if he contributes to a traditional IRA (consider only the funds contributed to the Roth IRA)?

c) Without doing any computations, explain whether the traditional IRA or the Roth IRA will generate a greater after-tax rate of return.