Team MembersTeam 6 James Ayoub Michael Pan Melissa Sy James Traylor
401K vs. Roth IRA • Introduction • Project Outline • Results • Conclusion
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
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
Subject • 25 year old Engineer • Starting Salary: $50,000 • Male • Secret identity: Clark Kent • Allergic to Kryptonite • Favorite Colors: Red & Blue
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)