Case Study Report 1

 1417Power Versus a 401K



The purpose of this report is to summarize the results of an analysis of the 1417Power Program versus participation in a company sponsored 401K Program that has a 50% company matching feature.


The generally accepted concept of funding retirement is to start saving after a person has achieved a career position and their employer offers a 401K program.


The US census bureau reports that 98% of 30 year olds have not yet started saving in a 401K or IRA. A very large percentage of 30 - 35 year olds are deep in debt. Almost half of college graduates have jobs paying under $40K after 5 years of career employment. There is little chance for them to save much for retirement. Government reports indicate the majority do not start participation in their company 401K program until after age 42.
The risk of 401K limits: The following rules summary is direct from the IRS:
IRS Announces 2016 Pension Plan Limitations; 401(k) Contribution Limit Remains Unchanged at $18,000 for 2016
The Internal Revenue Service today announced the pension plan limitations will not change for 2016. However, other limitations will change.

In summary the practical limit on annual contributions to a 401K program is $18,000, and may be lower in several situations.


Assumptions & Limitations


Study Assumptions:

  • An 11.5% annual rate of return is used for both the 1417Power Roth IRA and 401K account
  • The individual starts 1417Power program participation at age 14
  • The individual will have no other taxable income ages 14,15 and 16
  • The 401K analysis is based on a person having an annual income of $41,000 at age 32. They contribute 8% of their gross income to their 401K program with a 50% company match resulting in a $3,280 personal contribution plus $1,640 from company matching contribution
  • The 401K analysis assumes a 3% annual gross income increase resulting in 401K contribution and company match contribution increases
  • The 401K annual maximum of $18,000 applies to the combined personal plus company match for the life of the analysis
  • The annual 401K personal and company match contributions are tax deferred
  • The 2015 tax rate schedule for married / head of household is applied to the determine the tax on the value of the account at age 67

The 401K annual maximum of $12,000 in combination with personal and company contribution is reached by age 44. Thus from age 44 through age 67 the 401K contribution is limited to $12,000. This results in a decreasing percentage of earned income contributed from age 44 through age 67.

The Study Limitations:

  • The study is based on 2015 tax code and tax tables
  • The calculated Roth IRA future value is not a forecast or projection. It provides, on a mathematical basis, comparatives that are accurate for decision making


Analysis Methodology

  • The analysis is based on 3 consecutive years of matching gift Roth IRA contribution at the maximum $5,500 annual amount starting at age 19. Versus the equivalent cost applied to the 1417Power Program starting at age 14 with participation limited to the level that results in the $5,500 maximum Roth contribution each year
  • The taxed matching gift cost is based on the annual $5,500 maximum contribution limit (2015 tax law) plus 28% tax
  • The lowest cost for the 1417Power program was calculated based on applying the 1417Power maximum 20% discount
  • The higher value of the 1417Power program was calculated by applying the 1417Power maximum referral and revenue share credits, these are standard 1417Power Programs


The table below provides a summary of the cost and total Roth IRA account value of the 1417Power Program versus a cost and after tax (tax impact is net tax on 401K account value at retirement less annual tax savings during work years resulting from the 401K savings reduction in taxable income) and net 401K value



Personal & Company 50% match 401K contributions*

Personal only 401K contributions

Cost 1417

$13,200** to $16,500



Value of net after tax Retirement account at age 67*

$2,842,000 to $3,331,000***



* Roth IRA value is based on a mathematical calculation using 11.5% annualized rate of return. 11.5% is the 50-year average S&P500 index annual rate of return is not a forecast or prediction. Past performance of any investment program is not a predictor of future performance.

** 1417Power offers prepayment discounts up to 20%. The lower cost represents the maximum discounted program cost.

*** 1417Power offers referral and revenue share credits that increase the participants level and or duration up to a maximum of a 30% increase in participation. This results in approximately a 30% increase in the Roth IRA contribution amount.

**** 401K total value includes the annual personal and company match contribution plus compounded tax exempt earnings less the applicable tax on the total at age 67 plus the sum of the tax savings gained every year because of deducting the 401K personal contribution from taxable income.


Conclusion & Recommendation

The non-discounted, no credits added 1417Power Program results in a 67.5 % larger after tax retirement account value at age 67* versus the after net tax value of the 401K with company 50% matching contribution retirement account value at a cost of only 8.1 of the cost of the 401K program. If there is no company match the 1417Power Program results in a 145.4 % larger after tax retirement account value at age 67* versus the after net tax value of the 401K retirement account value at a cost of only 8.1 of the cost of the 401K program. The 1417Power Program advantage increases substantially when the 1417Power discounts are applied, and again with credits are applied.

In conclusion the analysis strongly recommends the 1417Power program versus the 401K concept because the 1417Power program has higher valuation. and because the 1417Power program participation is 100% within your control versus the risk of no company match.