How much will frank have accumulated on the day

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Frank is considering making an IRA contribution. Frank is single and is not covered by a retirement plan at work. He was born in January 1976. His salary is $60,000. He plans to begin making contributions to an IRA when he is age 30 and will continue making contributions until he reaches age 65. He anticipates he will have a 28% marginal tax rate during the years he contributes to the IRA. He will be age 66 when he starts withdrawing funds from the IRA and plans to withdraw the money over 16 years. He anticipates that he will have a 15% marginal tax rate during retirement. He anticipates a 5% rate of return both before and during retirement.

a. How much will Frank have accumulated on the day he retires if he contributes $3,000 a year to (1) a traditional IRA, (2) a Roth IRA, and (3) a regular savings account?

b. What will Frank's annual after-tax income be during his retirement years for (1) a traditional IRA, (2) a Roth IRA, and (3) a regular savings account?

c. How would your answers change to parts (a) and (b) if Frank begins making his $3,000 annual contribution at age 40 instead of at age 30?

Reference no: EM13518169

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