Having just started a nice job after graduation, you would like to be financially responsible and start planning for your expected retirement in 40 years. You have two main options to choose from:

1. Use pretax money and invest in a 401k (paying taxes on the back end)
2. Use after-tax money and invest in a Roth IRA (paying taxes on the front end)

Assume:

- you are looking to invest $3,000 worth of your pre-tax salary each year.

- your current marginal tax rate is 22% based on your $70,000/year salary using current tax law

- both options provide identical investment choices and you expect to earn 7.5% per year in either alternative

- the distributions from Roth IRA accounts will continue to not be taxed in future years

- your estimated marginal tax rate will be 24 percent when you retire

Which option will provide you with the highest retirement amount in 40 years when you plan to retire?

Please provide a sensitivity analysis to assist in your decision-making.