Accounting Question

Here are the instructions: You will write a 2-3 page paper discussing the data you collected using the AARP 401(K) and IRA calculators. You will include 4 charts showing the data you collected. The page length does not include the 4 charts.

This video goes through every step of what you should do to complete the paper, please watch it carefully. start the video from 1:45

instructions video

I have also attached an example of the charts, some FAQs, the learning objective (this is for a gerontology class), the rubric, and the slides that also take you through what you have to do . No ai, this has to be all in your own words. please let me know if there is any confusion as you go so i can clear it up and this is done correctly.

Here are the links for the charts you have to create:

401(k) calculator

&

ira calculator

GERO 200
Critical Thinking Assignment (CT) 2
Goals of CT2:
1. Learn about retirement/investment strategies
a. 401k and 403b investments (the numbers 401k and 403b refer to federal tax codes)
b. Individual Retirement Accounts (IRA) and Roth IRA
2. Understand the maximum amount you can invest annually using these retirement investment strategies (401k, IRA)
3. Understand how these investment strategies/tools take your money and investment it into the stock market
4. Understand the power of compound interest (what happens to your money/investment when you leave the gains
you make each year in the account to earn more money)
5. Understand why employer/company matching 410k funds are important when job hunting.
6. Understand the federal and state income tax benefits of when you invest your money into retirement accounts
(401k versus IRA versus Roth IRA)
Then think about what you have learned in class about the United States and, while you and your family may have
invested, a large percentage of Americans have not invested, because they were too poor or just didn’t think about
the future. – – What will the societal implications be for the US and countries around the globe with a growing aged
and dependent population that has no financial ability to care for themselves?
Critical Thinking Assignment 2 – CT2: What you need to do!!!!
Two examples of 401(k) retirement
accounts
401(k) Savings and Planning Calculator
https://www.aarp.org/work/retirementplanning/401k_calculator.html
Use the 401(k) calculator and design TWO different
scenarios of investing for your retirement.
1. You describe the changes you made,
2. The change in outcome of the account.
3. Provide images of tables and figures illustrating your
outcomes.
AND
4. Describe the federal limits imposed on 401k investing,
including catch-up funds and employer matching funds.
5. Describe how interest rate, gain return on investment
occurs through compound interest.
Two examples of Individual Retirement
Accounts (IRA) & define the difference between
a Roth IRA and an IRA
Traditional IRA Calculator
https://www.aarp.org/work/retirementplanning/traditional_ira_calculator.html
Just like the 401k, you do TWO scenarios, AND,
1. You describe the changes you made,
2. The change in outcome of the account.
3. Provide images of tables and figures illustrating your
outcomes.
AND – do 4. and 5. for IRA’s (as shown in the 401(k) example)
6. Describe the difference between an IRA and a ROTH IRA and
why you would use one over the other based on where you are
at in your career.
CT2 Grading Rubric
Grading
Criteria
Below
Expectation
Proficient
Excellent
Two examples of IRA, includes figures
and description of differences in
outcome, include compounding in your
answer
1 point
2 points
3 points
Two examples of 401k, includes figures
and description of differences in
outcome, include compounding in your
answer
1 point
2 points
3 points
Explain the difference between IRA an
Roth IRA
0 points
0.5 points
1 point
Explain the Federal Limits of annual
contribution of IRA and Roth IRA ,
including catch up funds
0.5 points
1 point
1.5 points
Explain the Federal Limits of annual
contribution of 401k, including
company match, and catch-up funds
0.5 points
1 point
1.5 points
Total = 10 points
OK GERO 200 CT2 Background
You are going to learn about investing in the stock market by doing. The American Association for Retired Persons
(AARP) created a number of interactive calculators to help you understand how to create your own comfortable
retirement.
AARP Tools & Calculators – How to set up budgets and predict your needs for retirement
https://www.aarp.org/tools/
Go into this main menu and check out the many ways to become informed about budgeting for your future. Many of
you are Marshall School of Business Majors at USC and your first jobs will be a “Money Manager” aka “Financial
Planner” at a major investing firm like Fidelity Investments, Vanguard Investments, Morgan Stanley Investing, TR Price
Investing. Setting up budgets and learning how to use investment tools like 401k’s and IRA’s serve as training for your
first job interview and how to manage your first clients.
For the rest of us USC people, you can learn how to invest into your retirement on your own and not have to pay fees
to the Marshall School of Business graduates indicated above  – All you have to do is open your own account, say in
Fidelity Investments, and learn how to navigate their website to do what you want to do.
Your GERO 200 CT2 is to use the AARP IRA calculator and the AARP 401k calculator to see what happens when you
invest in retirement accounts designed with tax incentives to save for the future.
OK GERO 200,
Here is the link to the AARP 401k calculator
401(k) Savings and Planning Calculator
https://www.aarp.org/work/retirementplanning/401k_calculator.html
Your assignment is to create TWO DIFFERENT
investment scenarios by entering values into the
calculator.
1. You then take screenshots of the two
outcomes.
2. You then describe in your own words
the changes you made and how it affected the
bottom line outcome of your retirement 401k
investment.
Scenario 1:
I am putting 5% of my salary into
my 401k each year
I entered a salary of $100,000
I entered a 5.2% annual increase in
my salary
I am starting my icurrent age of 30
years
I entered age at retirement as 65
I entered a current 401k balance of
$1,000
I entered an annual rate of return
for my 401k of 7%
401(k) Employer match:
I entered my Employer Match as
100%, meaning they match me 1:1
up to “Employer match ends 10%
of my salary – I entered 5% of my
salary so I could raise my
contribution and my employer
could match it up to 10%
Click on “View Report” to
see the outcome (next
slide in slide deck)
OK GERO 200, in this 410k example you invest
5% of your annual salary into your 401k
retirement account and your employer will
match you 1:1 or a 100% match of what you put
in. You put in 5% so your employer puts in an
addition 5% of your annual salary.
Your investment, without employer match
grows to $1,388,474.74 because you left the
gain made each year (7% gain in your
investment) in the account and then it gets
compounded each year at 7%).
Now, if your employer will match you 1:1 or
100% match of your 5%, and because you left
the gain made each year (7% gain in your
investment combined with your employer
match) your account grew to $2,766,272.06.
Let’s look at the details of “View Report” in
the Next slide:
The green box is you putting in 5%
of your annual salary into your
401k account. You start making
$100,000 per year at age 30, and
put $5,000 into your 401k. We said
a 5.2% annual raise in your salary,
so that means each year the 5%
you put into your 401k goes up.
For example, at 31 years of age it
goes up to $5,260. (5% of your new
salary of $15,200). It goes up each
year by 5%. At the end of 35 years
you put in $470,760.64 (add the
Scenario 1: first column). Now let’s look what
Just your
happens when you invest that 5%
and each year, leave the gain
5%, no
employer (expected 7% return) in your
account. This means your
match
retirement investment grows
through compound interest
(7%)(gain from your leaving your
money in the investment each
year) to $1,388,474.74 by age 64.
Not too bad, right GERO 200!!!!
Even better, lets see what happens
when your employer, like me, and
USC matches my investment in the
next slide
Scenario 1:
Now you
add your
employer
match, 1:1
with your
5%, and in
gold –
boom!!
The second column is your
company/employer match in, for
example, a 401k. The same thing
happens. Your employer puts in
$10,000 per year in this example (a
2:1 match to your 5%, listed as a
%200 match). Again, your salary is
increasing by 5.2% every year in this
example, so your employer is
putting in more each year (the
matching 200% or 2:1 of your 5%).
You put $470,760 into your 401k
(remember the previous slide), your
company matched you 1:1 or 100%
and put in the same amount of
$470,760.
This is an important consideration
when you look at a job offer. Does
the company have a matching 401k
program?
OK, now, you leave the gain on the
investment from your contribution,
and the gain on the investment from
your company match in your 401k
account for 34 years until you retire
at 64 (remember we said 7% annual
gain in the stock market), this gets
compounded. The total amount put
in the Fidelity retirement account
(your 5% plus your company’s match
of 5%) is $941,521.28, but
compound interest by reinvesting
each years gain puts the value at
$2,766.272.06!!!!!!!!!
In 401(k) Scenario 2,
I left everything the same, BUT, I
changed my employer match to
2:1 or 200%
Lets do “View Report” and see
what happened,
Look what happened in Scenario 2 GERO 200,
When your employer matched your 5% of salary
investment, or 2:1 (aka 200% in the calculator),
your 401(k) account grew to $4,144,065.97
Remember, when you look at the table and
analysis it is because of compound interest
where we predicated our investment into the
stock market (i.e. Mutual Funds) would produce a
7% return on our investment. That return was
reinvested every year creating the “compounding
effect” where the bar graphs grow exponentially
instead of linearly.
Scenario 2, just like Scenario 1 for
your money you invested
The green box is you putting in 5%
of your annual salary into your
401k account. You start making
$100,000 per year at age 30, and
put $5,000 into your 401k. We said
a 5.2% annual raise in your salary,
so that means each year the 5%
you put into your 401k goes up.
For example, at 31 years of age it
goes up to $5,260. (5% of your new
salary of $15,200). It goes up each
year by 5%. At the end of 35 years
you put in $470,760.64 (add the
first column). Now let’s look what
happens when you invest that 5%
and each year, leave the gain
(expected 7% return) in your
account. This means your
retirement investment grows
through compound interest
(7%)(gain from your leaving your
money in the investment each
year) to $1,388,474.74 by age 64.
Not too bad, right GERO 200!!!!
Scenario 2, is different in your
company matching your 5% in a 2:1
(their money in CARDINAL and your
money plus theirs in GOLD.
he second column is your
company/employer match in, for
example, a 401k. The same thing
happens. Your employer puts in $10,000
per year in this example (a 2:1 match to
your 5%, listed as a %200 match). Again,
your salary is increasing by 5.2% every
year in this example, so your employer is
putting in more each year (the matching
200% or 2:1 of your 5%).
You put $470,760 into your 401k, your
company put $941,521.
This is an important consideration when
you look at a job offer. Does the
company have a matching 401k
program?
OK, now, you leave the gain on the
investment from your contribution, and
the gain on the investment from your
company match in your 401k account for
34 years until you retire at 64
(remember we said 7% annual gain in
the stock market), this gets
compounded. The total amount put in
the Fidelity retirement account is
$1,412,042.84, but compound interest
by reinvesting each years gain puts the
value at $4,144,065.97!!!!!!!!!
https://www.easysurf.cc/fsalary.htm
What is my salary if I get a 5.2%
raise every year? Try 3% too, it is
a lot more realistic
https://www.easysurf.cc/fsalary.htm
On the left, we have the optimistic
5.2% annual raise. It gets compounded
annually and you end up making
$589,591 at the end of 35 years.
On the right, a more realistic 3% raise
annually. Again, it gets compounded
annually and you end up making
$281,386. at the end of 35 years.
The next three slides provide you with some information
about the rules you have to follow when investing in a
401(k) as imposed by the Federal Government
(taken from the AARP website)
How do you know how much to put
into your 401K accounts?
It is limited by rules put into place by
the Federal Government
The calculator makes the calculations
reflecting these Federal Limits.
The calculator menu does not provide
“catch up” increases after the age of
50. So mention that in your paper –
you would put even more in the
account as indicated to the right
when you turn 50 (if you can afford
to).
OK GERO 200,
When you click on the ? For “Percent to contribute” this pop up box reminds you about the MAXIMUM dollar
amount your can contribute to your 401k annually, $22,500. After 50, the US Government allows a “catch-up”
additional contribution of an extra $7,500. The AARP 401k calculator does not have this option, but be award it exists.
We are assuming the AARP calculator maxes out at $22,500 if the % of your income you indicate in “Percent to
contribute” exceeds $22,500.
OK GERO 200,
The “employer match” is important to consider when
you are looking at corporate jobs. This is free money,
extra salary so to speak, that you can access after 67
years of age.
The way it works in the calculator is, for example, does
the employer match your contribution, say, one-to-one
up to the % contribution you put in (the previous slide).
USC is a good example. The USC 401k limits my
contribution to 5% of my annual salary. So, it I make
$100,000, my limit is $5,000. I put 100% in the
“employer match” if they match me one-to-one for the
5% I put in. USC actually matches two-to-one, or 200%
for the 5% I contribute. So, as in the example above, I
put in $5,000 and USC puts in $10,000. That would
mean $15,000 is put into my 401k retirement plan that
year.
Individual Retirement Account (IRA)
&
Roth IRA
Traditional IRA Calculator
https://www.aarp.org/work/retirementplanning/traditional_ira_calculator.html
Just like the 401k, you do TWO scenarios, AND,
1. You describe the changes you made,
2. The change in outcome of the account.
AND
Describe the difference between an IRA and a ROTH IRA
and why you would use one over the other based on
where you are at in your career.
Clicking on “Married” is not
explained well in this IRA exercise.
The reason the “Married” option is
there for your IRA is related to the
maximum amount your can deduct
from your taxable income each year
when you invest. You can reduce
more when you are single than
married.
Clicking on “View Report” provides the table on the left and the complementary
figure on the right. They both provide the same information.
IRA size when
you retire
(before you pay
taxes on each
withdrawal)
The actual
money available
to spend during
retirement after
taxes are taken
out of your IRA.
What happens if
you do not put
your $6,500 into
an IRA. It is taxed
at 24% and you are
left with $4,500
and it grows to this
amount over the
same time period.
1)
2)
The $6,500 you earned is taxed each paycheck, say at 24%, so you are left
with $4,500 to invest after the tax is taken out. It grows in you saving
account to $518,909.97 when your retire (earing maybe 5% interest).
Put your same $6,500 into an IRA account and your money would grow to
$1,035,693.11 over the same period of time (7% interest) and now you
only pay taxes on what you spend . That is a $516,783.14 increase in your
retirement money!!!
The left side of the table shows the growth of
your money at 7%, not taxed when you put it
into your IRA. The assumption is you will be at a
lower taxable rate when you start spending you
money in retirement (you only get taxed on the
money you spend in retirement).
The right side of the table show the growth of
your money each year if you paid taxes first,
then invested and got 5% from your savings
account
Scenario 1
Clicking the “Maximize
contributions” box adds $1,000
per year extra starting at 50 years
of age – the so called “catch-up
contribution”. That would be an
extra $15,000 when you retire at
age 65.
The balance with no catch-up on
the left was $1,035,693.11 than
you add the $15,000 and you get
$1,050,693.11 –
But look at the top, it says
$1,062,581.17, That is an extra
$11,888.06 gained by investing in
the stock market through your
IRA over the same period of 15
years.
REMEMBER, even though you will
withdraw money from your
retirement account to live on
when you retire, it is still in your
investment account and the
money that is left in the account
continues to gain value, like the
7% we put in.
Scenario 2
Traditional IRA Calculator
https://www.aarp.org/work/retirement-planning/traditional_ira_calculator.html
Remember GERO 200, to tell us in your CT2 the
difference between an IRA and a Roth IRA, and when it
make sense for you to invest in one over the other
based on how much money you are making when you
make the investment!!! Use these links to get informed.
Everything You Need to Know About Roth IRAs
https://www.aarp.org/money/investing/info2022/roth-ira-basic-guide.html