What value is greater accretion if she roll over traditional

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Reference no: EM134333

Question

Yuki (age 45 at year-end) has been contributing to a traditional IRA for years (all deductible contributions) as well as her IRA is now worth $50,000. She is trying to decide whether she must roll over her traditional IRA into a Roth IRA. Her existing marginal tax rate is 25 percent. She devices to withdraw the entire balance of the account in 20 years as well as she expects to earn a before tax rate of return of 5 percent on her retirement accounts as well as a 4 percent after-tax rate of return on all investments outside of her retirement accounts. For each of the subsequent alternative scenarios, indicate how much more or else less Yuki will store after taxes in 20 years if she rolls over her traditional IRA into a Roth IRA. Be sure to comprise the opportunity cost of having to pay taxes on the rollover

a) While she withdraws the retirement funds in 20 years, she guesses her marginal tax rate to be 35 percent. $______value is GREATER accretion if she rolls over traditional into Roth IRA

b) While she withdraws the retirement funds in 20 years, she guesses her marginal tax rate to be 20 percent. $______value is LOWER accretion if she rolls over traditional into Roth IRA

c) Suppose the same facts as in part b., except that she earns a 3 percent after-tax rate of return on investments outside of the retirement accounts. $______value is GREATER accretion if she rolls over traditional into Roth IRA

Reference no: EM134333

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