Define the taxable account

Reference no: EM131500132

Question: You will need a calculator for this problem. Sam earns $4,000, and he wants to save it for retirement, which is 10 years away. He can either save it in a taxable account or put it into a Roth IRA. Suppose that Sam can receive an annual rate of return of 8 percent and his marginal tax rate is 25 percent. By the time he reaches retirement, how much money would he have in either option? [Note: Sam has to pay tax on the $4,000, so he cannot put the full amount either into the taxable account or the Roth IRA.]

Reference no: EM131500132

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