Question: A taxpayer wants to invest the maximum allowed in his
A taxpayer wants to invest the maximum allowed in his retirement account. He has come to you for advice as to whether he should contribute to a traditional deductible IRA or to 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. Be explicit about any assumptions you need to make when comparing the two alternative retirement accounts.
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