To be able to compare and contrast the options of saving for retirement:

Traditional IRA, Roth IRA, & 401k

“When it comes to the future, there are three kinds of people: those who let it happen, those who make it happen, and those who wonder what happened.”

- John M. Richardson

“

“The best thing about the future is that it comes one day at a time.”

- Abraham Lincoln

Traditional IRARoth IRA401k plan IRA Individual Retirement

Arrangement There are benefits to each

type…

Tax Benefits Your money accumulates

interest that is tax free! You can put in up to $5,000

per year• After age 50, it increases to

$6,000

You can put money into it until April 15th of the next year.

Funded with pre-tax money You pay taxes on the money when you

withdraw the money after retirement Interest is tax free

No income limits Can begin to withdraw funds when you

are 59½ years old with no penalty When you are 70½, you must take

yearly w/d no more contributions after 70½

Funded with after-tax money You pay no taxes when you withdraw

Income limit: less than $101,000 No penalty for early w/d of principle

money You may not w/d the interest until

retirement w/o penalty No age requirement for withdrawals No age requirements for

contributions

Roth IRA You are young Make < $50,000 Your tax rate will be higher

when you retire.Traditional IRA

If your tax rate will be lower when you retire

If you are closer to retirement

Employer-sponsored retirement plan

FREE MONEY!!!!!!! Employer matches contribution

Money is contributed to 401k plan pre-tax Pay taxes when you make w/d after

59½ Cannot w/d before 59½ w/o penalty

http://www.bloomberg.com/personal-finance/calculators/401k/

401k Calculator

You can take a loan from your 401k plan to pay certain expenses Not a good idea!! You will be

taxed twice! You can participate in 401k & IRA

at the same time

1. Explain the difference between the Traditional & Roth IRA.

2. What method would you suggest to Brittany?