At age 60, an individual who is now 25 year old wants to have accumulated a $200,000 retirement account. If the person expects to remain in the 27% incremental tax bracket, and the available pension funds are assumed to earn 9% interest. What amount would have to be contributed each year form this individual?s annual income under the following pension plans:
(a) tax on contributions and accumulations;
(b) tax on contributions but not accumulations;
(c) tax-deferred contributions and accumulations.
What a re the final amounts, normalized in percentage terms?
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