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.
- 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 contributionbe for both the traditional and Roth IRA? Explain any differences your research shows.
- 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?