Endmode pmtyr12 pmt4005000times53 int10 n42035x12

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Unformatted text preview: as 403 (b) or 457 Plans) 401­K benefits/matching Matching 401­K plans are a key to building wealth if you take full advantage of savings & match Illustration ALWAYS SAVE ENOUGH TO GET YOUR FULL EMPLOYER MATCH For example, if employer matches 3% maximum for your first 5% saved, you must save at least 5% of your paycheck or you are giving away money 37 401­K TVM Problem Assume you make $60,000 per year ($5,000/month) and save monthly in a 401­K plan. You save 5% and the employer matches 3%. How much will you have in the plan after 35 years assuming a 10% return? 38 401­K TVM Problem Assume you make $60,000 per year ($5,000/month) and save monthly in a 401­K plan. You save 5% and the employer matches 3%. How much will you have in the plan after 35 years assuming a 10% return? End mode Pmt/yr = 12 Pmt = ­400 (5,000 times (5% + 3%)) Int = 10 N = 420 (35 x 12) Solve for FV = 1,518,655.22 39 Younger Employees Are Now Saving More Age Group % Participating in % Participating in Employer’s 401­K Employer’s 401­K Plan 2003 Plan 2012 Under 25 years old 27% 44% 25 – 34 years old 58% 63% 40 Recent 401­K Plan Issues Employees must select investments High income employees do well, average income employees lack the expertise to invest Many employees are too heavily invested in their owncompany’s stock Recent market downturns have significantly reduced savings available for retirement Too much money was allocated to stocks near retirement Many folks may not be able to retire, or...
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