5/26/2021 Writing...

Question

5/26/2021 Writing Assignmenthttps:gcc.instructure.com/courses/31308/assignments/428315?module_item_id= XXXXXXXXXX/2Writing Assignment Due  Jun 8 by 11:59pm  Points  70  Submitting  a file uploadFile Types  doc and docxStart AssignmentWritten AssignmentAssignment:Watch the following PBS Frontline video on the financial industry and its involvement in the 401(k)etirement system and read the accompanying publication:http:www.pbs.org/wgbh/frontline/filmetirement-gamble(http:www.pbs.org/wgbh/frontline/filmetirement-gamble/)TheRetirementSavingsDrain.pdfWrite a minimum of at least three pages on the following questions (size 12 font and double spaced). The paper needs to be submitted as a Word document file into Canvas (Vericite). Cite all of your sources.For each of your answers I want you to provide clear reasoning detailing your position using conceptsand economic logic learned in class and from the textbook.  XXXXXXXXXXWhy is there a market failure in the 401(k) market? (Hint: read chapter 8 and its description ofimperfect information) XXXXXXXXXXDescribe and detail all of the fees/costs associated with a 401(k).3)     Calculate two individuals total amount of retirement assets after 30 years of investing using thefollowing two examples to display and articulate the effect of compounded fees on two differentindividuals' retirement accounts with the exact same mutual funds. The two mutual funds have the sameefore expense rate of return, but one mutual fund charges a higher expense ratio than the other.Describe what effect fees have on the two different individuals' retirement assets:(a) Yearly Savings: $15,000, Inflation Rate: 2%, Rate of Return:(8.15%-.15%=8%), Expense Ratio of MutualFund: .15%, Periods: 30 yearshttp:www.pbs.org/wgbh/frontline/filmetirement-gamblehttps:gcc.instructure.com/courses/31308/files/3143831?wrap=15/26/2021 Writing Assignmenthttps:gcc.instructure.com/courses/31308/assignments/428315?module_item_id= XXXXXXXXXX/2(b) Yearly Savings: $15,000, Inflation Rate: 2%, Rate of Return:(8.15%-.65%=7.50%) (It is lower thanexample (a) due to the increased expense ratio), Expense Ratio of Mutual Fund: .65%, Periods: 30 yearsUse this financial calculator website for the examples: http:www.financeformulas.net/Future-Value-of-Growing-Annuity.html(http:www.financeformulas.net/Future-Value-of-Growing-Annuity.html) XXXXXXXXXXDescribe and come up with your own solution to alleviate the problems with 401(k)s.http:www.financeformulas.net/Future-Value-of-Growing-Annuity.html

Tanmoy · Accepted Answer

Written Assignment
1. Why is there a market failure in the 401(k) market?
Not all the employees are covered under the retirement scheme of 401(k). Also more than 40% of the employees do not have right of entry to the plan. Even there are many who choose not to contribute or they contribute very small amount towards the scheme. Due to these disparities present in this scheme, one who needs to be covered, it becomes inappropriate to use the system as the primary source for social security.
Also the 401(k) system is too much inefficient for individual accounts and this is a huge failure of the scheme. In the traditional scheme, the individuals contributed the amount in a shared pool which led to reduction in the administrative costs as the usage of this fund was for shared pool purpose. In the 401(k) system, the individual account holders donate fees individually to manage their accounts due to which there is a reduction in the savings by more than 30%. Due to this reason there is a high risk for the individual investors. Few investors focuses towards generating a high rate of return from the stock market while most of the ordinary and less knowledgeable investors are unable to decide on the best investment alternatives (Tang. 3). Some investors’ makes investment on hoax or for fun in order to allocate their savings to various options and offers of the 401(k) scheme. But, they hardly look back at the stocks selected by them even when there is a paradigm shift in the market trends.         
2. Describe and detail all of the fees/costs associated with a 401(k)
The 401(k) scheme charges high amount of fees all of which are not known to the individual account holders. There may be many hidden charges which are extremely high if compared with the services offered by other schemes (Tang. 3). The fees of the scheme may seem little but in the long run due to various other charges the cost increments to $70000.

5/26/2021 Writing Assignment https://gcc.instructure.com/courses/31308/assignments/428315?module_item_id= XXXXXXXXXX/2 Writing Assignment Due Jun 8 by 11:59pm Points 70 Submitting a file upload File...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment