Calculate, compare, and contrast different types of retirement plans, including IRAs, ROTH accounts, and annuities.
Example: Suppose you put $5000 per year into an IRA for 40 years. If the account pays 6% per year interest, how much would you have at the end of the 40 years? If, at that time, you are in the 15% income tax bracket, how much would this be after taxes?
Suppose that, instead, you paid the tax each year on the $5000 at your current rate of 28% and put the remaining funds in a ROTH account paying 6% interest. How much would you then have after 40 years?
Which appears to be the better option? What are some of the risks of deferring tax payments until retirement?
Example: Explain the difference between an Individual Retirement Account (IRA) and a ROTH account.
Why might somebody choose to put retirement funds in a ROTH account rather than an IRA?
Subject Area: X-Mathematics (former standards - 2008)
Body of Knowledge: Financial Literacy
Idea: Level 3: Strategic Thinking & Complex Reasoning
Date Adopted or Revised: 09/07
Date of Last Rating: 06/07
Status: State Board Approved - Archived