Jorge Contributes $5,000 to a Traditional Nondeductible IRA in the Current

question 235

Essay

Jorge contributes $5,000 to a traditional nondeductible IRA in the current year and makes no subsequent contributions. Assume that the investment in the IRA yields 6% per year and that Jorge allows his investment to accumulate for 20 years. At the end of twenty years, he withdraws all of the amounts from the IRA when his marginal tax rate is 30%. What is his after- tax accumulation?

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Definitions:

Money Supply

The complete portfolio of monetary assets at a fixed point in time within an economy, including cash, coins, and amounts in checking and savings accounts.

Deposits

Funds placed into banking institutions for safekeeping, which can earn interest over time depending on the type of account.

Federal Open Market Committee

The branch of the Federal Reserve System that determines the direction of monetary policy, including decisions on interest rates and the growth of the United States money supply.

Regional Fed Presidents

Officials who head the regional Federal Reserve Banks, playing key roles in monetary policy discussions and implementation in the United States.