Yon made contributions to a Traditional IRA over the course of 15 working years. Her contributions averaged $4,000 annually. Yon
was in the 29% tax bracket during her working years. The average annual rate of return on the account was 5%. Upon retirement, Yon stopped working and making IRA contributions. Instead, she started living on withdrawals from the retirement account. At this point, Yon dropped into the 15% tax bracket. Factoring in taxes, what is the effective value of Yon's Traditional IRA at retirement? Assume annual compounding. 1)
$141,367.11
First find the future value of an annuity ordinary using the formula of Fv=pmt [(1+r)^(n)-1)÷(r)] Fv future value? PMT 4000 R 0.05 N 15 years Fv=4,000×(((1+0.05)^(15)−1)÷(0.05)) Fv=86,314.25
Then deducte the 15% tax bracket from the amount we found to get the effective value of Yon's traditional IRA at retirement 86,314.25−86,314.25×0.15 =73,367.11
This is because you take 18x100(100 is the total % under 72 because 72 is out of 100) that equals 1800. then, you take 1800 and divide it by 72. That is because 72 is the actual number that we already have. You would get 25 after dividing. hope this helps:)
