Question

Suppose that Ramos contributes $4000/year into a traditional IRA earning interest at the rate of 5%/year compounded annually, every year after age 35 until his retirement at age 65. At the same time, his wife Vanessa deposits $2900/year into a Roth IRA earning interest at the same rate as that of Ramos and also for a period of 30 years. Suppose that the investments of both Ramos and Vanessa are in a marginal tax bracket of 35% at the time of their retirement and that they both wish to withdraw all of the money in their IRAs at that time. (a) After all due taxes are paid, who will have the larger amount? Ramos Vanessa (b) How much larger will that amount be? (Round your answer to the nearest cent.)

Answer 1

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