Comparison of Various Personal Retirement Investments

1
Comparison of Various Personal Retirement
Investments

• EGR 403-01
• Summer 2005
• Group 8
• Members
• Jon Kai-Tsun Chan
• Steven Doyle
• Simon Margolis
• Thomas Nance
• Tal Bezalel Nehmad

2
Purpose

• Research Various Investment Options For
  Retirement
• How Do They Compare To Each Other?
• Which Yields Most Money For Retirement?
• Is It Worth The Risk?

3
Sample Investor Background

• Age 25 Years
• Projected Retirement Age 70 Years
• Life Expectancy 90 Years
• College Graduate, Starts Work At Age 22, Starts
  Saving For Retirement At Age 25
• Starting Salary 55k/year With 1000 Increase
  Each Year To Retirement
• Savings For Retirement 10 Of Salary Per Year
• Investor Is Married Accounted For When Filing
  Taxes

4
Assumptions

• General Average Inflation Rate 3
• No Massive Inflation/Depression Eras
• No Situations Requiring Taking Money Out Of
  Retirement Fund(s)
• Stable Job(s)

5
Investment Options

• IRA Fund
• - Roth vs. Traditional
• Company 401(k)
• - Personal Contribution Only vs. Company
  Matching CD Purchase
• Mutual Funds
• - Domestic vs. International
• Annutities
• - Fixed vs. Variable
• IRA, 401(k), Mutual Funds Stock Market At
  Various Levels
• - Risk vs. Reward

6
IRA Account

• Roth vs. Traditional
• Comparing Earning Power For Each Under Equal
  Circumstances
• - Assume Contributions Are Same For Both IRAs
• - Taking Into Account Taxes
• - Not Including Early Withdrawal Penalties For
  Traditional
• - Balance Of Saved Salary Will Be Saved In
  Credit Union At 2 Interest

• Factors For Consideration
• - Traditional Contributions Are Done Pretax
  Taxed Upon Withdrawal
• - Roth Contributions Are After Tax Without Tax
  Upon Withdrawal
• - Maximum Yearly Contribution, Raised Upon Age
  50
• - Age Requirements
• - Additional Circumstances Set Forth By
  Investor Assumptions

7
401(k)

• Comparison Of Two 401(k) Options
• - All 10 To 401(k)
• - Half Of 10 To 401(k) With 50 Company Match
• - Other Half To CD With 4 Rate Compounded
  Monthly
• Rate Of Return 5

8
Annuities

• Fixed vs. Variable
• Comparison Of Earning Power Based On
• - Fixed Requires 10k minimum 5 Years Time
• - Variable Requires 10 Years
• - Interest Rate
• - Contribution Amount
• - Risk Levels
• - Tax Deferral
• - Periodic Payment Option For How Long
• - Age Requirements

9
Mutual Funds

• Domestic vs. International
• Comparison Based On
• - Contribution Amount With No Maximum
• - Domestic Management For International Funds
• - Potential Currency Fluctuations Economic
  Status For International Funds

10
Diverse Portfolio

• IRA, 401(k), Mutual Funds Stock Market At
  Various Levels
• Professionally Managed vs. Employee-Managed
• Profit vs. Risk
• It Is Your Money Your Responsibility

11
Resources

• Vanguard IRAs Roth vs. Traditional
• Fidelity IRA Accounts
• Bloomberg 401(k) Calculator
• CD Calculator
• Fidelity Mutual Funds
• The Vanguard Group
• Primerica Financial Services
• IRS Income Tax Tables
• Fidelity