Explain which account would earn more money for the investor: a traditional IRA or a Roth IRA. Support your statements with reasons and examples. A 401(k) is an employer sponsored deferred contribution retirement plan. For example: You sign up for a 401(k) plan in your workplace and choose investment within the plan. Money is taken out of your paycheck before income taxes are taken out and deposits this in your plan (when you reach retirement) money can be taken out of 401(k). But these withdrawals are taxable at the time of withdrawals, since taxes were not paid earlier. The benefits of the deferred tax structure is based on the assumption that you'll be in a lower tax bracket in retirement compared to your prime earning years that was for 401(k) IRA on the other hand Roth IRA is an independent individual retirement account that you set up directly with an investment firm. You can directly deposit money into Roth IRA, you can withdraw both your deposits and investment gains completely tax free provided you satisfy few conditions like plan was in existence for 5 or more years when the investor is 59.5 years or more. With a 401(k) retirement plan, an employer may match contributions made by an employee up to a certain percentage. For example: if you contribute 8% then employer will make a contribution of say 3% to 5% (it's free money from employer, like perk). Whereas in case Roth IRA you only contribute. A 401(k) would earn more from the investors. Describe how people can identify their federal tax brackets. The marginal tax bracket system is a gradual tax schedule, the more you earn the more tax you pay. The amount of taxable income that you earn that determines which tax bracket you fall into only the money you earn within a certain tax bracket will be taxed at that rate. When you are moved in to higher tax bracket. Only the money that falls within that higher tax is bracket is taxed at the higher rate. For example: if you are moving from 25% tax bracket to 28% tax bracket you may believe that the entire income is to be taxed at 28%. However, only the money the 28% bracket is taxed at that rate. Also, filing status will determine the eligibility for tax credits or deductions and your final tax status like married filing separately, married filing jointly, head of household etc. It is important to note that there are restrictions on certain tax breaks for married couples filing separately, and that this status is usually considered less beneficial because it can result in a higher overall tax for a married couple. Married filing jointly will offer more tax benefits tax rates are lower when filing status is "Head of Household", also it offers higher standard deductions. So, the factors which decide the tax brackets are: 1. Amount of taxable Income 2. Filing Status Use the following hypothetical questions/situations to explain the retirement plans in further detail. If you were to invest $3,500 in traditional IRA and a Roth IRA, after making adjustments for possible tax deductions, what would your net contribution be for both the traditional and Roth IRA? Explain any differences your research shows. In a traditional IRA there is either an equal or near to equal contribution made by employer. So, if $3,500 is to be invested let's assume that another $3,500 to be invested by employer with a total contribution (of 3500+3500=7000) the net contribution would be the same as the total contribution, tax rate is not given. Let's assume tax assume tax slab of 28%. Traditional IRS-matching contribution from employer Net contribution-$3,500+3,500=7,000 Roth IRA Assumption-Tax bracket of 28% Net contribution= amount invested minus tax=$3500 minus (28% on 3500)= $3500- $980=$2520 Hence net contribution is not of taxes in case of Roth IRA Once the traditional IRA or Roth IRA is established, you decide to invest the proceeds in a mutual fund. Identify the type of mutual fund you would select. Examples include stocks, bonds, or a balanced mutual fund. Using the Internet, research and select a specific mutual fund that meets your desired risk tolerance. You can use examples of mutual fund companies such as Oppenheimer and Franklin Templeton. Be sure to justify your selection. Based on the average annual return on the mutual fund selected, you invest $3,500 for thirty years without withdrawing any of the proceeds. How large would the balance be at the end of thirty years? Include your calculations in your presentation. To avoid the process of probate, and ensure that the balance in this fund transfers upon death to a person of your choice, explain how this account should be set up to ensure a prompt and direct transfer. As an employee of an organization, you may have access to invest in a 401(k) plan. Explain what a 401(k) plan is as well as its benefits. When one has the option to utilize a 401(k) from an employer, explain what restrictions are in place to limit 401(k) contribution? I am in California. Sorry this powerpoint presentation is due tomorrow by or before midnight. Here is the actual information for assignment or was my notes good enough: Assignment 1: LASA: Understanding 401(k) and IRAs For this assignment, you will prepare a PowerPoint presentation evaluating and explaining the 401(k) and Individual Retirement Accounts (IRAs) at a local community center, where you have been invited to speak. The audience will be a group of people who already work for companies that provide a 401(k) plan, so they are familiar with the basic concepts. The goal of the presentation is to explain to the audience the differences between the 401(k) and IRAs. Include the following: •Explain which account would earn more money for the investor: a traditional IRA or a Roth IRA. Support your statements with reasons and examples. •Describe how people can identify their federal tax brackets. •Use the following hypothetical questions/situations to explain the retirement plans in further detail. 1.If you were to invest $3,500 in traditional IRA and a Roth IRA, after making adjustments for possible tax deductions, what would your net contribution be for both the traditional and Roth IRA? Explain any differences your research shows. 2.Once the traditional IRA or Roth IRA is established, you decide to invest the proceeds in a mutual fund. Identify the type of mutual fund you would select. Examples include stocks, bonds, or a balanced mutual fund. Using the Internet, research and select a specific mutual fund that meets your desired risk tolerance. You can use examples of mutual fund companies such as Oppenheimer and Franklin Templeton. Be sure to justify your selection. 3.Based on the average annual return on the mutual fund selected, you invest $3,500 for thirty years without withdrawing any of the proceeds. How large would the balance be at the end of thirty years? Include your calculations in your presentation. 4.To avoid the process of probate, and ensure that the balance in this fund transfers upon death to a person of your choice, explain how this account should be set up to ensure a prompt and direct transfer. 5.As an employee of an organization, you may have access to invest in a 401(k) plan. Explain what a 401(k) plan is as well as its benefits. When one has the option to utilize a 401(k) from an employer, explain what restrictions are in place to limit 401(k) contribution? Support your statements with examples and scholarly references. Remember to include detailed speakers' notes to include additional remarks that could be used as a script when presenting to a live audience.