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Team Members Team 6

This project compares the 401(k) and Roth IRA retirement plans, focusing on tax implications, contribution limits, and withdrawal rules. We analyzed assumptions such as equal contributions, salary raises keeping pace with inflation, and a flat tax rate. Our findings indicate that the 401(k) plan outperforms the Roth IRA based on the criteria and parameters we set, including no employer matching and no social security benefits. For a 25-year-old engineer starting with a $50,000 salary, the advantages of the 401(k) are evident over a 35-year working period.

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Team Members Team 6

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Presentation Transcript

  1. Team MembersTeam 6 James Ayoub Michael Pan Melissa Sy James Traylor

  2. 401K vs. Roth IRA • Introduction • Project Outline • Results • Conclusion

  3. 401K Tax-Deductible Contribution limit is $15,500 Withdrawals are fully Taxable Roth Ira Non Tax-Deductible Contribution limit is $5000 Tax-free Withdrawals 401K vs. Roth IRA

  4. Assumptions Made • Equal contributions to both plans • Roth IRA ineligibility ignored • Flat tax (not tiered) • Annual salary raises kept up with inflation at 3% • ROR is 10% • No 401K matching from employer • No Social Security Benefits • No investment fees • 35 working years

  5. Subject • 25 year old Engineer • Starting Salary: $50,000 • Male • Secret identity: Clark Kent • Allergic to Kryptonite • Favorite Colors: Red & Blue

  6. Results

  7. Conclusion From our default assumptions our analysis concludes that the 401K is a better plan than the ROTH IRA.

  8. Resources • www.moneychimp.com (great for tax rates) • www.mutualfundsabout.com (Contribution limits to retirement plans) • www.fool.com (general information on plans)

  9. Questions?

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