Team Members Team 6 James Ayoub Michael Pan Melissa Sy James Traylor.
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Team Members Team Members Team 6 Team 6 James Ayoub James Ayoub Michael Pan Michael Pan Melissa Sy Melissa Sy James Traylor James Traylor
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Transcript of Team Members Team 6 James Ayoub Michael Pan Melissa Sy James Traylor.
Team MembersTeam MembersTeam 6Team 6
James AyoubJames AyoubMichael PanMichael PanMelissa SyMelissa SyJames TraylorJames Traylor
401K vs. Roth IRA401K vs. Roth IRAIntroductionIntroduction
Project OutlineProject OutlineResultsResults
ConclusionConclusion
401K vs. Roth IRA401K vs. Roth IRA
401K401K Tax-DeductibleTax-Deductible Contribution limit is Contribution limit is
$15,500$15,500 Withdrawals are fully Withdrawals are fully
TaxableTaxable
Roth IraRoth Ira Non Tax-DeductibleNon Tax-Deductible Contribution limit is Contribution limit is
$5000$5000 Tax-free WithdrawalsTax-free Withdrawals
Assumptions MadeAssumptions Made Equal contributions to both plansEqual contributions to both plans Roth IRA ineligibility ignoredRoth IRA ineligibility ignored Flat tax (not tiered)Flat tax (not tiered) Annual salary raises kept up with inflation at 3%Annual salary raises kept up with inflation at 3% ROR is 10%ROR is 10% No 401K matching from employerNo 401K matching from employer No Social Security BenefitsNo Social Security Benefits No investment feesNo investment fees 35 working years35 working years
SubjectSubject
25 year old Engineer25 year old Engineer Starting Salary: $50,000Starting Salary: $50,000 MaleMale Secret identity: Clark KentSecret identity: Clark Kent Allergic to KryptoniteAllergic to Kryptonite Favorite Colors: Red & BlueFavorite Colors: Red & Blue
ResultsStarting Salary
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$0 $10,000 $20,000 $30,000 $40,000 $50,000
Starting Salary
Ac
cu
mu
late
d In
co
me
401K Accumulated Income
Roth IRA Accumulated Income
Parameter- Percent of Savings
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
0% 5% 10% 15% 20% 25%
% Savings
Acc
umul
ated
Inco
me
401K Accumulated Income
Roth IRA AccumulatedIncome
Inflation
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%
Inflation Rate
Acc
umul
ated
Inco
me
401K Accumulated Income
Roth IRA AccumulatedIncome
Yearly Living Expenses
$0
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
$6,000,000
$0 $100,000 $200,000 $300,000 $400,000 $500,000
Yearly Living Expenses
Acc
umul
ated
Inco
me
401K Accumulated Income
Roth IRA AccumulatedIncome
Conclusion
From our default assumptions our analysis concludes that the 401K is a better plan than the ROTH IRA.
Resources
www.moneychimp.com (great for tax rates)
www.mutualfundsabout.com (Contribution limits to retirement plans)
www.fool.com (general information on plans)
Questions?Questions?
