Question: A taxpayer is about to receive a 1 000 bonus
A taxpayer is about to receive a $ 1,000 bonus payment from his employer. He would like to put this bonus into a retirement account. He has come to you for advice as to whether he should put the $ 1,000 into a traditional deductible IRA or a Roth IRA account. You learn that he faces a current marginal tax rate of 28% and expects to face the same rate in 40 years, when he plans to withdraw the funds at age 70. He expects to earn a pretax rate of return of 10% in either retirement account by investing the funds in corporate bonds. Advise the taxpayer as to what he should do.
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