PERSONAL INVESTING OPTIONS Team Members: Mauricio Coto - Organizer Michael Thompson - Summarizer Saurabh Desai - Techie Farouq Mahadin - Techie
PERSONAL INVESTING OPTIONS ROTH IRA ROTH IRA ANNUITIES ANNUITIES 401K 401K
ROTH IRA Individual Retirement Account Individual Retirement Account Uses after-tax contributions Uses after-tax contributions Grows tax free Grows tax free $3,000 limit in 2003 $3,000 limit in 2003
Annuities Insurance agrees to make periodic payments after the person retires Insurance agrees to make periodic payments after the person retires Uses after-tax contributions Uses after-tax contributions Tax deferred until withdrawal Tax deferred until withdrawal Taxes paid on benefits only Taxes paid on benefits only Unlimited Contributions Unlimited Contributions
401K Retirement savings plan funded by employee contributions Retirement savings plan funded by employee contributions Often employee matched Often employee matched Tax deductible Tax deductible Tax deferred until withdrawal Tax deferred until withdrawal $13,000 limit in 2003 $13,000 limit in 2003
CHOICES Roth IRAAnnuities401K Tax Deductible Tax Deferred Taxed at Withdrawal What is Taxed$0Profit onlyWhole sum Contribution Limits $3000Unlimited$13,000
GOAL What is the Best Choice? What is the Best Choice? Taxes NOW or taxes LATER? Taxes NOW or taxes LATER?
Study Case 25 yr. Old single male 25 yr. Old single male 35 years till retirement (retire at 60) 35 years till retirement (retire at 60) 54K beginning salary + 2% per year 54K beginning salary + 2% per year Marries at 30 Marries at 30 ROR decreases closer to retirement ROR decreases closer to retirement 3% Inflation 3% Inflation
TAXES NOW OR TAXES LATER VS.
CALCULATION END RESULTS
INVESTMENT & TAXATION
SENSITIVITY ANALYSIS
INCREMENTAL INVESTMENT
CONSTANT INVESTMENTS
NUMBER OF YEARS INVESTING (1)
NUMBER OF YEARS INVESTING (2)
VARYING AGI
CONSTANT ROR
OVERALL TAXES PAID
VARIABLE ROR
OVERALL TAXES PAID (VARIABLE ROR)
WHERE TO INVEST??? ROTH IRA ANNUITIES 401K
QUESTIONS ???