Jenny age, 55 wants to convert $18,000 balance in her traditional IRA account into Roth IRA after paying necessary taxes. In addition, she plans to deposit $5000 (post tax) into Roth IRA. How much can Jenny withdraw from Roth IRA after 5 years (when she is 60)? Assume expected return of 10% and marginal tax rate of 28%.

A.$28,925

B $26,389

C. $28,500

D. $27,634

answer

watching

117

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Trinidad TremblayLv2

13 Dec 2018

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Yuki (age 45 at year-end) has been contributing to a traditional IRA for years (all deductible contributions), and her IRA is now worth $38,000. She is trying to decide whether she should roll over her traditional IRA into a Roth IRA. Her current marginal tax rate is 25 percent. She plans to withdraw the entire balance of the account in 20 years and she expects to earn a before-tax rate of return of 4.8 percent on her retirement accounts and a 3.8 percent after-tax rate of return on all investments outside of her retirement accounts. For each of the following alternative scenarios, indicate how much more or less Yuki will accumulate after taxes in 20 years if she rolls over her traditional IRA into a Roth IRA. Be sure to include the opportunity cost of having to pay taxes on the rollover. (Round "Future value factor" to 4 decimal places. Round final answers to the nearest whole dollar amount.)

a. When she withdraws the retirement funds in 20 years, she expects her marginal tax rate to be 35 percent.

b. When she withdraws the retirement funds in 20 years, she expects her marginal tax rate to be 20 percent.

c. Assume the same facts as in part (b), except that she earns a 2.8 percent after-tax rate of return on investments outside of the retirement accounts.

Kathleen, age 56, works for MH, Inc. in Dallas, Texas. Kathleen contributes to a Roth 401k and MH contributes to a traditional 401k on her behalf. Kathleen has contributed $22,500 to her Roth 401k over the past six years. The current balance in the Roth 401k account is $37,500 and the balance in her traditional 401k is $26,250. Kathleen needs cash because she is taking a month of vacation to travel the world. Answer the following questions relating to distributions from Kathleen's retirement accounts assuming her marginal tax rate for ordinary income is 28%.

A) If Kathleen receives a $3,750 distribution from her traditional 401k account, how much will she be able to keep after paying taxes and penalties, if any, on the distribution?

B) If Kathleen receives a $3,750 distribution from her Roth 401k account, how much will she be able to keep after paying taxes and penalties, if any, on the distribution?

C) If Kathleen retires from MH and the she receives a $3,750 distribution from her traditional 401k account, how much will she be able to keep after paying taxes and penalties, if any, on the distribution?

D) If Kathleen retires from MH and the she receives a $3,750 distribution from her Roth 401k account, how much will she be able to keep after paying taxes and penalties, if any, on the distribution?

E) Assume the original facts except that Kathleen is 60 years of age, not 56. If Kathleen receives a $3,750 distribution from her Roth 401k (without retiring), how much will she be able to keep after paying taxes and penalties, if any, on the distribution?

Weekly leaderboard

Home

Homework Help 3,900,000

Finance 370,000

Unlock all answers

Related questions

Related Documents

FIN-2860 Study Guide - Quiz Guide: Alimony, Gross Income, Intestacy

FIN 502 Chapter Notes - Chapter 8: Human Resources, Trust Law, Government Communications Headquarters

FIN 210 Study Guide - Quiz Guide: Dollar Cost Averaging, Money Market Fund, Party Favor

Weekly leaderboard