Retirement Quantitative Analysis

Item

Without 401(k)

With 401(k)

401(k) Contribution

Notes

Gross Pay per pay period

Maximum 401(k) contribution rate

10% (enter same amount in both columns

Employer match

5% of pay amount

Taxes (assume 20%)

State, Federal, FICA: subtract the 401(k) contribution from Gross Pay before calculating tax

Additional deductions

250

250

Take Home Pay

Gross pay minus contributions minus taxes minus additional deductions

Effect on pay to contribute to 401(k)

Difference between take home pay amounts

Total 401(k) contribution

Employer & Employee

Net Gain / Loss of participating in 401(k)

Total 401(k) contribution minus Effect on pay to contribute to 401(k)

Annual amount of contributions to 401(k)

The case states there are 24 pay periods per year.

Monthly amount of contributions to 401(k)

Divide annual amount

Assume you are 30 years old now and participate in the 401(k) plan for 10 years – contribution the same dollar amount and having the same amount matched for the next 10 years. If you earn 6% on you and your employer’s contributions what is the value of your account at the end of the 10 years?

Amount in your account at the end of the first year

For ease of calculations, assume no growth on the money during the first year.

Monthly contributions

Employer and employee money

Years until you complete 10 years

You have completed one year already

Growth rate

6%

Also called interest rate

Compound interest multiple

1 x

Times money is compounded per year

Go to

http://www.investor.gov/tools/calculators/compound-interest-calculator#.U_I5ZcVdXmc

for the remaining questions

What is the value of your account at the end of 10 years?

Fill the above amounts into the calculator

What is the value of your account when you are eligible for FULL Social Security benefits if you make NO additional contributions to the plan but continue to earn 6% on your money already in the plan?

Start with the value of your account at 10 years as the “new” principle, no additional contributions. If you are 30 years old today, how old do you have to be to receive Full Social Security Benefits? In ten years how many MORE years are there until you will be THAT age?

What is the value of your account if you continued to participate in the plan at the same dollar amounts until you re eligible for full social security benefits?

Add back into the calculator the monthly contributions from both the employer and employee.