Show your work. Andy lets a few years go by, he now works full-time at a consulting firm. He would like to max out his contribution to his individual retirement accounts this year. Under the current tax law, the limit on contributions to individual retirement accounts is $6,000 after-tax into a Roth or $6,000 pre-tax into a deductible IRA. Andy now has 40 years until retirement and a 30% marginal tax rate, which you expect to drop to 25% at retirement. His pre-tax rate of return is11%. Calculate the after-tax wealth accumulation of a contribution of $6,000 pre-tax dollars to a traditional deductible IRA vs $6,000 post-tax dollars to a Roth IRA. (For a valid comparison, assume any excess funds are invested in an SPDA earning 11%.)

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Assuming Andy contributes 6000 to a traditional deductible IRA his aftertax wealt... View the full answer