Repurposing Project

Report
Group 5
Benjamin Johnson
Kyle Miyahara
Daniel Cameron
Kevin Yang

November 18, 2015

Aminah BarnesCannon
Global Campus Faculty
Washington State University
Subject: Submission of Report
Dear Aminah,
We are pleased to submit the report that you asked for and gave us the authorization to work on
How to Plan for Retirement: the 401(k), IRA, and Roth IRA Plans for this part of our course.
We have each worked diligently and carefully to create an informative report as well as a web
domain.
A study was conducted to enhance our knowledge of this subject to make an executive report.
This study has given us an understanding of how to plan not only for our futures but to help
those around us as well. It has been rewarding to create this report as well as web domain and we
sincerely hope that it fulfills your expectations.
We have worked hard to create an informative and clear report that you will have no trouble
reading and understanding. We would like to thank you for providing us with the opportunity to
create this.
Sincerely,
Benjamin Johnson
Kyle Miyahara
Daniel Cameron
Kevin Yang

Table of Contents
Page Section
1 Introduction
1-2 Research Methods
2-4 Results
4 Conclusions
4-5 Recommendations
5 Appendix A: Works Cited
5 Appendix B: Final Product

Executive Summary
The following study was conducted to describe how an individual entering the workforce should
begin to save for retirement. The report outlines background information such as current
retirement planning statistics for those who have been in the workforce. It is often a good
assumption to make that the current generations will act similarly to those directly ahead of them
within the workforce. People are taught how to help the society around them, not how to save for
their futures, so current statistics should be a good indicator for how the current generation will
act in the future. The study shows the trends of the rising costs of living. Through inflation as
well as the market, the cost of living has been increasing steadily over the years. The study also
shows the different retirement planning methods that are available to individuals entering the
workforce. The retirement methods observed are 401(k), IRA and Roth IRA accounts. At the end
of this report, an additional resource has been added which was created to address any further
questions detailing the material within this report.

Introduction

Money is an important aspect to survival in todays society. Without money, food, shelter, and
other amenities are not readily accessible. Throughout every persons life growing up, they are
taught skills to support society in some way. These skills are rewarded with money that can be
used to fulfill their lifes needs. During schooling, nobody is taught how to save their money for
problems that may arise in the future. This is because it is an intuitive process to save money so
that it will be accessible later. There will come a point in everyones life where they will become
unfit to work. At that point, they will cease to have any income. This could be forced upon
people, or they can choose to retire. When money stops flowing into a persons accounts, they
need to be prepared with enough assets to last longer than they plan on living. This can be done
in a few ways. One way that a plan can be created for when retirement occurs in an individuals
life is the availability of a 401(k) plan offered by the individuals place of employment. A 401(k)
plan; however, is not necessarily required to be offered to employees. In the event that an
employer does not offer a 401(k) plan or other options, individual retirement accounts (IRA) are
also available to be opened. There are two types of accounts that can be opened. One is a normal
IRA account and the other is a Roth IRA account. Each plan that an individual can invest in has
its own limits that govern the extent that the plan can be utilized. Since these options are there to
begin saving for retirement, there are often penalties for withdrawing the money before a
predetermined time. Saving for retirement is something every individual should think about, as
there will come a time when an individual will cease to be fit for working and bringing in money.
As they will likely not utilize all the money they make while going about life, it is a wise
decision to invest it in some form so that they can utilize that money later.
Research Methods
Task 1. Gather background information on retirement planning, savings and statistics.
The first step in our research was looking at the background issues related to retirement
planning and savings in general. To fully understand how saving for retirement will help
younger workers, we must know the challenges they face with regards to relying on
current entitlement programs as well as saving on their own. How much younger workers
already understand about retirement planning and saving will determine what kind of
retirement accounts and strategies young workers would be comfortable with. We looked
at current retirement savings statistics through government websites and other financial
websites to discover any trends or data related to success and failure in retirement
savings. With this information gathered we noted the challenges that mattered the most
and what young workers could expect in the future.
Task 2. Research the need to plan ahead and save.
The second step of our research was to determine how to meet the retirement savings
needs of our audience. After looking at the background information we used internet
research to help support the claim that younger workers need to be saving more for their
own retirement. Doing internet searches yielded important results, such as longer life
spans and increasing medical costs. This information is in addition to the fact that
everyone quits working at some point in their life and must have financial security for
when they can no longer work. With an early start and diligent management, saving for
retirement is achievable for young workers today.

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Task 3. Research available savings options.
The third step of our research included examining the retirement savings account options
and determining the benefits and drawbacks of each one. By looking at the retirement
account options available to young workers we hope to explore the effectiveness of
saving for your own retirement. These retirements accounts should be able to help our
audience prepare for retirement and include tax benefits and employer matching for some
funds. Any retirement saving account should offer some benefit over just putting money
in a saving or checking account. Other retirement account benefits or problems will also
be discussed, but mainly we seek to start the conversation on the importance of getting
started with retirement savings while young.
Task 4. Produce a website that the audience can use with information and external links.
The final step in our project included creating a website to present our research findings
and listing any recommendations we may have. The website offers a description of
different retirement accounts and a frequently asked questions section where our
audience can gain more knowledge about each account type. The website may offer links
to outside resources that can help our audience learn more about the importance of saving
for retirement. If possible we would like to include some visual learning aids in our
website, either upload a video from YouTube or present a slideshow or flowchart. The
main goal of the website is to make it easy for our audience to learn about retirement
planning and saving and what they can do to better themselves later on.
Results
Task 1. Gather background information on retirement planning, savings and statistics.
http://www.cdc.gov/nchs/fastats/life-expectancy.htm
http://www.infoplease.com/ipa/A0005140.html
http://www.ebri.org/
Life expectancy has been rising over the years. In the last 150 years, both male and female life
expectancy has risen from 38 and 40 years respectively to 76 and 80 years respectively (Life
Expectancy by Age). People are living longer than ever before and the trend seen through data
shows that life expectancy is continually growing. Many people over the years believe that the
retirement age is increasing. In 1991, 84% of people believed that they would retire by the age of
65 or earlier. In the year 2015, only 46% of respondents believe that they will retire by the age of
65 (Employee Benefit Research Institute). Over the past 5 years, respondents savings accounts
have followed fairly consistent models. For those who have savings in place, roughly 50% of
them have less than $25,000 in savings. The statistic is slightly skewed as the age groups for this
are not reported. Although that does not take into account of the ages considered, its not too far
off from the actual statistic. Another study shows that for the age group of 55 and above, 52% of
them have less than $50,000 in savings (excluding the value of their homes or defined benefit
plan assets).
Task 2. Research the need to plan ahead and save.

http://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx?
reloaded=true

The need to plan ahead arises in accordance to the rising life expectancy (Life Expectancy by
Age). The cost of living increases as inflation occurs. From 1950 to 2015, the Consumer Price
Index (CPI) has increased by 10 times its original amount. This means that $1 in 1950 was a lot
more valuable than it currently is. A comparison is given to understand just how valuable money
was compared to the current year. For example, if in 1913, someone had $0.099 the value of that
9.9 cents in the year 2013 is $2.33 (McMahon, 2015). This shows how saving money can be very
damaging as it depreciates its value. However, as everyone inherently knows, no one can work
until the day they die. People will be forced to stop working either from medical reasons, the job
laying people off, or family reasons. Spending money because it will depreciate if not used is a
very unwise plan of action as noted in Task 1. People plan to live longer after they reach
retirement. Although money depreciates over time, it only depreciates if the money is sitting still.
Saving money is still an important aspect to retirement. Investment schemes need to be followed
in order to combat the effects of inflation.
Task 3. Research available savings options.
https://www.fidelity.com/retirement-planning/learn-about-iras/what-is-an-ira
http://www.rothira.com/traditional-ira-vs-roth-ira https://www.irs.gov/RetirementPlans/Plan-Participant,-Employee/401k-Resource-Guide-Plan-Participants-GeneralDistribution-Rules
To counteract the effects of inflation, there are a few retirement savings options available to
people. The first plan to talk about is a 401(k) plan. The 401(k) plan is a type of defined
contribution plan. Defined contribution means that a certain amount of money from each
paycheck is added to an account that can accrue money via an investment scheme. Many 401(k)
plans have employer matching advantages. This means that an employer will match the money
invested to a predefined extent. Through this savings method, inflation is counteracted by
additional money being added to the original amount. It is also counteracted by the investment
accruing interest over time (IRS). Another plan for retirement is the use of an individual
retirement account known as an IRA. There are two IRA accounts that will be discussed. The
first account to be noted is a normal IRA. The normal IRA is an account that allows money to be
deposited before being taxed and it has a larger interest rate than normal savings accounts. Upon
withdrawing from the account, taxes are taken. Penalties may also occur if money is withdrawn
earlier than the term of the IRA (Fidelity).
The second account to be noted is a Roth IRA. The Roth IRA is an account like the IRA where
money can be deposited in an account with a higher interest rate; however, it differs from a
normal IRA account because the money is taxed upon depositing into the account. Upon
withdrawing from the account, no more taxes are taken from the account. The disadvantages and
advantages for IRA and Roth IRA accounts are governed by the limits imposed on these
accounts. There are limits to how much money can be deposited in these accounts. Both Roth

IRA and IRA accounts can have a maximum of $5,500 contributed to the account per year, this
max contribution amount fluctuates each year depending on inflation.
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Task 4. Produce a website that the audience can use with information and external links.
The website we created will help our audience understand the importance of saving for
retirement. There are videos presenting basic challenges to retirement savings, graphs that show
how the fundamentals for retirement planning and savings have changed and a link to an
interactive calculator where our audience can determine how much money they will need for
retirement. This format for the repurposed product is interactive and educational, combining
facts from several resources to make the challenge of saving for retirement easier to understand.
By presenting some background information and the ability to calculate roughly what someone
would need to retire, we next present the most common retirement accounts and describe them in
greater detail. There are links to external sources where audience members can learn even more
about their retirement planning and savings options.
Conclusions
From our research, we have found that it is very important to have a retirement plan right when a
person enters the workforce. As healthcare becomes more advanced, the life expectancy of many
individuals will rise steadily. This can place more importance on having a retirement plan set up
early in an individual's career as longer life expectancy will require a larger amount of savings to
accommodate the costs associated with a longer life. Costs such as food, medical, and possibly a
retirement home. Each individual is slightly different. There are many options of saving for
retirement such as a 401(k), Roth IRA, or an IRA account. Some may offer employer matching
of whatever the employee puts into their savings account and some may not. Some individuals
may want to invest their retirement savings into something through the help of an agent.
Either way, any type of retirement savings plan is better than simply adding money into a normal
savings account. Even if money depreciates over time, each individual still needs to have money
to be able to support themselves after they retire. All of this information will then be put into a
nice web page so that the individual looking to see a list of benefits of opening a retirements
savings account and types of savings accounts that will provide the maximum amount of savings
when it comes time for the individual to retire.
Recommendations
When saving for retirement, the first option to look at is a 401(k) plan with an employer. This
should be the first option to look at when beginning to save for retirement as the accounts have a
larger yearly contribution limit, and generally have employer matching bonuses. The employer
matching benefits are first and foremost the biggest draw to a 401(k) plan. The employer
matching is essentially extra money that is contributed to an account. The employer gives
employees free money when a 401(k) plan has a defined matching system for 401(k)s. The next
reason people should look into opening a 401(k) with an employer is the larger limit to saving
than an IRA. If a 401(k) account is not available to employees, then the employee should
consider an individual retirement account.

With the maximum contribution to either type of IRA being defined as $5,500, the advantages
and disadvantages to each account can be seen. If the maximum contribution is going to be met
5
either using an IRA or Roth IRA account, then taxing the money upon contributing to the
account is a better decision. After one year, both accounts would have $5,500 in them but the
Roth IRA account will not be taxed any further. This is only the case if maximum contributions
will be made each year. If the maximum contributions will not be made each year, then a normal
IRA account will be the better choice as it will hold more money and have more money accruing
interest than the Roth IRA. For example, if someone contributes $2,000 per year of their money
then the IRA account will hold $2,000 after the first year and the Roth IRA will hold some
amount less than $2,000 as it has the taxes already taken out of it. Basic accounting shows that
larger investments accrue more interest than smaller investments.
Appendix A: Works Cited
"401(k) Resource Guide - Plan Participants - General Distribution Rules." IRS. Web. 16 Nov.
2015. <https://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/401k-Resource-GuidePlan-Participants-General-Distribution-Rules>.
"EBRI Employee Benefit Research Institute." Employee Benefit Research Institute. Web. 11
Nov. 2015. <http://www.ebri.org/>.
"Life Expectancy by Age, 18502011." Infoplease. Infoplease. Web. 19 Nov. 2015.
<http://www.infoplease.com/ipa/A0005140.html>.
McMahon, Tim. "Historical Consumer Price Index (CPI-U) Data." Historical Consumer Price
Index (CPI). 17 Nov. 2015. Web. 18 Nov. 2015.
<http://inflationdata.com/Inflation/Consumer_Price_Index/HistoricalCPI.aspx?reloaded=true>.
Spors, Kelly. "Traditional IRA vs. Roth IRA." Web. 13 Nov. 2015.
<http://www.rothira.com/traditional-ira-vs-roth-ira>.
"What Is an IRA? (Individual Retirement Account) - Fidelity." What Is an IRA? (Individual
Retirement Account) - Fidelity. Fidelity. Web. 19 Nov. 2015.
<https://www.fidelity.com/retirement-planning/learn-about-iras/what-is-an-ira>.
Appendix B: Final Product
team5wsu.weebly.com