1a) State whether the contributions are pre-tax or post-tax, whether gains are taxed or not, and whether distributions are taxed or not for:

i) Traditional 401(k). ii) Roth 401(k).

b) For which age demographic does a Roth IRA investment generally result in more income than a Traditional IRA? Why?

19.1 19.2 LIFE-CYCLE FINANCIAL PLANN Taxable vs. Traditional vs. Roth Savings $80.000 Inputs Salary Savings at Current Tax Rate Retirement Years Tax Rate Current Age Retirement Age Expected Age of Death Low Return Medium Return High Return 11.0% Rate of Return on Retirement investments Taxable investment Contributions are pestak Gains are taxable immediately. Distibutions are not taxed) Annual Retirement Savings (Post Tax) Rate of Return (Post-Tax) 240% 5.60% 8.80% Cumulative Savings at Retirement (Post Tax) $32.900 $1.344 365 $3.074,699 Annual Retirement income $363461 $115 361 $365,090 Traditional IRA or 401(k) Contributions are preta: Gains are not taxed: Distributions are taxed) Annual Retirement Savings (Pre-Tax) $12.000 Cumulative Savings at Retirement Pre-T) $904 815 $2.305 621 $6.981.913 Annual Retirement income $18.971 $154,177 5621,776 A Roth IRA 401Contributions are posts Gains are not taxed. Distributions are not taxed rmen Sargs Posts 9600 Cumulative Savings Romant Posts) 5723852 $1916 497 5 5 530 Ann R income $41.59 $164.456 663227 19.1 19.2 LIFE-CYCLE FINANCIAL PLANN Taxable vs. Traditional vs. Roth Savings $80.000 Inputs Salary Savings at Current Tax Rate Retirement Years Tax Rate Current Age Retirement Age Expected Age of Death Low Return Medium Return High Return 11.0% Rate of Return on Retirement investments Taxable investment Contributions are pestak Gains are taxable immediately. Distibutions are not taxed) Annual Retirement Savings (Post Tax) Rate of Return (Post-Tax) 240% 5.60% 8.80% Cumulative Savings at Retirement (Post Tax) $32.900 $1.344 365 $3.074,699 Annual Retirement income $363461 $115 361 $365,090 Traditional IRA or 401(k) Contributions are preta: Gains are not taxed: Distributions are taxed) Annual Retirement Savings (Pre-Tax) $12.000 Cumulative Savings at Retirement Pre-T) $904 815 $2.305 621 $6.981.913 Annual Retirement income $18.971 $154,177 5621,776 A Roth IRA 401Contributions are posts Gains are not taxed. Distributions are not taxed rmen Sargs Posts 9600 Cumulative Savings Romant Posts) 5723852 $1916 497 5 5 530 Ann R income $41.59 $164.456 663227