Question

Suppose that Ramos contributes $6000/year into a traditional IRA earning interest at the rate of 2%/year compounded annually, every year after 35 until his retirement age at age 65. At the same time, his wife Vanessa deposits $4900/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 they both wish to withdraw all fo the money in their IRAs at that time. (a) After all the taxes are paid, who will have the larger amount? (b) How much larger will that amount be? (need answer rounded to the nearest cent)

Answer 1

a) Vanessa will have the larger amount.
b) The amount will be $3,845.00 larger.