Required information New Hire Decisions: Roth or Traditional Retirement Savings Eva is excited to start her position in the Accounting Department of Longevity, Inc., a local company known for its employees staying with the company for their whole career. While filling out her new hire packet to select health care coverage and other benefits, Eva must decide which retirement plan option offered by Longevity, Inc. makes the most sense for her personal goals. Longevity, Inc. offers a Roth plan of a Traditional plan for retirement savings. Eva considers the following variables, constraints, and assumptions: . Her starting salary is $120,000; Longevity, Inc. has historically increased employee compensation by 3% annually. She wants to contribute 5% of her annual salary to the retirement account, but must keep her after tax take home pay the same regardless of the chosen option Longevity, Inc s retirement investment options are expected to earn a 12% rate of return. Eva expects to work for Longevity, Inc. for 30 years and will spend 20 years in retirement . During retirement, Eva intends to exit her retirement account investments and will take an even distribution of the retirement savings each year. Eva's goal is to maximize her after tax cash flow in retirement but also wants to minimize the amount of tax she pays over her lifetime. Using 2021 Income tax brackets and assuming the inflation adjustments to tax brackets and standard deduction continue as trended from 2019 to 2021. you have created the following Tableau visualization to help Eva make a decision. Mouse over the graphs to reveal specific amounts for use in answering the following questions. Note the Data pane provides a summation of values based on the selected Year(s) slider and Roth or Traditional option in the dropdown . menu. Market Value Average Tax Rate Data 52.000.000 Tradonal 2000 Roth $1,500,000 15.00 Salary $7.764,834 Retirement Contri $285,453 AGI 57,479.381 Std Deduction (5842,283) Taxable income 56 637.090 Traditional Tax $1.223.830 After Tax Cash Flow 56,255,551 Tax (Benefit) Detri $162522 $1,000,000 10 0091 $500,000 5.009 Year Roth 1 50 50 0 000 0 10 20 30 40 50 0 10 20 30 40 50 Traditional 140.000 Retirement Contribution T Tax (Bene Detriment 520.000 30 10 15 20 29 10 O 10 15 300K 200K AGI After Tax Cash Flow Salary Taxable income 100K OK 0 5 10 15 20 25 35 45 50 +obleau Required: a. What is the expected Market value in year 30 under each option? b. What is the lifetime (year 1 through 50) Taxable income and Tax expected to be i Eva chooses the traditional retirement account c. Under which option will Eva pay less Tax over her lifetime? d. Which option has a lower average tax rate over her lifetime? e. Which option maximizes Eva's After Tax Cash Flow in retirement? Complete this question by entering your answers in the tabs below. y Reqa Reqb Reqc Red Rege What is the lifetime (year 1 through 50) Taxable income and Tax expected to be if Eva chooses the traditional retirement account? Income Tax Complete this question by entering your answers in the tabs below. Reqa Reqb Reqc Tweegd Rege Which option has a lower average tax rate over her lifetime? Traditional with a tax rate of % Complete this question by entering your answers in the tabs below. Req a Reqb Reqc Read Rege Which option maximizes Eva's After Tax Cash Flow in retirement? Traditional Dollar amount
