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Personal Investment: Roth IRA vs. Traditional IRA

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. Study & Compare Traditional IRA and Roth IRA Which Yields The Most Money?

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Personal Investment: Roth IRA vs. Traditional IRA

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  1. 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

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

  3. Scenario Of Investor • Current Age : 25 Years • Projected Working Career : 50 Years • College Graduate, Starts Saving At 25 • Starting Salary : $55k, 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

  4. Cash Flow Diagram

  5. Elements Of Sensitivity • IRA Rate Of Return - 4% to 14% • Years Of Work - 25 to 60 Years • Starting Salary - $50k to $70k • 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

  6. IRA Rate Of Return

  7. Starting Salary

  8. Salary Increase

  9. Years Of Work

  10. Savings Percentage

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

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