You are considering making a one-time contribution to either a 401k plan, a Roth IRA, or a regular non-retirement investment account. You can use $3,000 of your pre-tax earnings to contribute. With
each of the plans, assume you would buy an index fund and hold it for 40 years, earning an annual
return of 8%. Assume you are in the 25% tax bracket now and will be in the 33% bracket 40 years
from now. For the sake of simplicity, for both years assume that all ordinary income is taxed at the
appropriate marginal rate and that all long-term capital gains are taxed at 15%.
2 pts
Question 12
If you invested in the Roth IRA, how much money would you have 40 years from now after
taking account of current and future taxes on income and distributions?
Question 13
2 pts
If you invested in the 401K, how much money would you have 40 years from now after taking
account of current and future taxes?
Question 14
2 pts
If you invested in the regular taxable investment account, how much money would you
have 40 years from now after taking account of current and future taxes?