Personal Investment Roth IRA vs Traditional IRA EGR

Purpose & Assumptions l l l Study & Compare Traditional IRA and Roth IRA

Scenario Of Investor l l l l Current Age : 25 Years Projected Working

Elements Of Sensitivity l l l IRA Rate Of Return - 4% to 14%

IRA Rate Of Return ROR Traditional Roth 0. 50% $208, 584 $202, 753 1%

Starting Salary Starting Annual Salary Future Value IRA Roth $30, 000 $961, 831 $1,

Salary Increase % Raise Traditional Roth 0. 5% $2, 563, 984 $3, 437, 612

Years Of Work Future Value Age At Retirement Traditional Roth 50 $272, 470 $335,

Resources l l l l Vanguard IRAs : Roth vs. Traditional Fidelity IRA Accounts

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Personal Investment: Roth IRA vs. Traditional IRA EGR 403 -01 Summer 2005 Group #8 Members: Jon Kai-Tsun Chan Steven Doyle Simon Margolis Thomas Nance Tal Bezalel Nehmad

Purpose & Assumptions l l l Study & Compare Traditional IRA and Roth IRA Which Yields The Most Money? Perform Sensitivity Analysis To Find Where One Becomes Better Than Other l l l No Massive Inflation/Depression Eras No Situations Requiring Taking Money Out Of Retirement Fund(s) Stable Job(s)

Scenario Of Investor l l l l Current Age : 25 Years Projected Working Career : 50 Years College Graduate, Starts Saving At 25 Starting Salary : $55 k, 1% Increase, $400 Savings For Retirement : 10% Of Net Income Investor Is Single At 25, Married At 29, First Child At 31, Purchases House At 32, Second Child at 34 Mortgage, Taxes, & Deductions Included In Analysis

Cash Flow Diagram

Elements Of Sensitivity l l l IRA Rate Of Return - 4% to 14% Years Of Work - 25 to 60 Years Starting Salary - $50 k to $70 k Salary Increase – 0. 5% to 3. 5% Per Year Contribution Amount Of Net Salary - 2% to 20% All Values Not Being Modified Are Kept As Stated In Scenario

IRA Rate Of Return ROR Traditional Roth 0. 50% $208, 584 $202, 753 1% $227, 335 $226, 418 2% $228, 791 $286, 539 3% $292, 528 $369, 794 4% $382, 795 $486, 393 5% $511, 682 $651, 287 6% $696, 950 $886, 385 7% $964, 694 $1, 223, 821 8% $1, 353, 242 $1, 710, 717 9% $1, 918, 853 $2, 416, 152 10% $2, 744, 024 $3, 441, 316 11% $3, 949, 579 $4, 934, 284 12% $5, 712, 226 $7, 111, 456 13% $8, 289, 985 $10, 288, 610 14% $12, 058, 936 $14, 925, 771

Starting Salary Starting Annual Salary Future Value IRA Roth $30, 000 $961, 831 $1, 320, 819 $50, 000 $2, 375, 121 $3, 186, 433 $55, 000 $2, 739, 112 $3, 664, 842 $60, 000 $2, 981, 034 $4, 105, 417 $80, 000 $3, 517, 698 $5, 414, 198

Salary Increase % Raise Traditional Roth 0. 5% $2, 563, 984 $3, 437, 612 1. 0% $2, 707, 784 $3, 664, 842 1. 5% $2, 937, 837 $3, 910, 741 2. 0% $3, 146, 747 $4, 177, 275 2. 5% $3, 372, 212 $4, 466, 640 3. 0% $3, 615, 848 $4, 781, 298 3. 5% $3, 879, 444 $5, 124, 005

Years Of Work Future Value Age At Retirement Traditional Roth 50 $272, 470 $335, 281 60 $715, 199 $928, 693 74 $2, 739, 112 $3, 664, 842 90 $12, 615, 886 $17, 019, 600

Savings Percentage

Resources l l l l Vanguard IRAs : Roth vs. Traditional Fidelity IRA Accounts The Vanguard Group Primerica Financial Services IRS Income Tax Tables Fidelity Essentials of Engineering Economic Analysis