Final Answer:
Based on the chart, the accurate statements about investment returns are:
- a. If you invest $2,000 each year for 30 years, your money will grow more in a traditional IRA than in a basic savings account.
- d. If you invest $2,000 each year for 30 years, putting your money in a basic savings account will likely earn you less than putting that money in a 401(k) or a traditional IRA.
Step-by-step explanation:
When investing $2,000 annually for 30 years, a traditional IRA tends to outperform a basic savings account due to several factors. IRAs offer the potential for compounded growth, where earnings are reinvested, allowing your money to grow exponentially over time. Additionally, traditional IRAs provide tax advantages; contributions are often tax-deductible, and the growth is tax-deferred until withdrawal, enabling more significant capital accumulation.
Conversely, a basic savings account usually offers lower returns because the interest rates, especially in today's market conditions, might not match the growth potential provided by investment vehicles like IRAs or 401(k)s. Savings accounts generally offer minimal interest rates that may not keep pace with inflation, thereby limiting the growth of your invested funds over 30 years.
Comparing a 401(k) or a traditional IRA to a basic savings account, these retirement accounts typically offer a broader range of investment options, potentially higher returns, and, in the case of 401(k)s, employer matching contributions that significantly boost overall returns over time.
Therefore, options A (traditional IRA outpacing a basic savings account) and D (401(k) or traditional IRA likely outperforming a basic savings account) accurately depict the expected investment returns over a 30-year period.
Correct answer: A and D