
Part One:
When you are young, it's almost impossible to think ahead to next month, much less to retirement. But the following exercise will show you how saving each month will grow to a large sum.
Note: The chart below gives a projection of what a 401(k) might be worth at retirement. It allows you to see the impact of increases in the amount contributed and the dramatic difference in accumulation when you save for 20 rather than 40 years. (The chart does not take into account the taxes you will eventually pay as you withdraw funds from your account.)
IMPORTANT NOTE: Be sure to click "clear all" after you finish one calculation and before you start another.
401(k) Growth Chart  
Monthly Salary  Percent of Salary You Contribute to Your 401(k) each month (taxdeferred)  Percent of Salary Your Employer Contributes to Your 401(k)  Rate of Return You Expect  Number of Years to Retirement  PROJECTED AMOUNT IN YOUR 401(k) AT RETIREMENT (before taxes) 
$2000  3% ($60)  0%  6%  40  
$2000  7% ($140)  3%  6%  40  
$3000  7% ($210)  0%  6%  20**  
$3000  7% ($210)  0%  6%  40  
$3000  7% ($210)  7%  6%  40  
$4000  7% ($280)  7%  6%  40  
$4000  7% ($280)  7%  6%  20** 
Part Two
The 401(k) Growth Chart provides a longterm plan with results based on a fixed rate of interest. But what if you have been saving and financial markets become unstable just before or just after you retire? How would that affect the return on your investment?
Retirement Danger Zone Chart  
Portfolio Value Five Years Before Retirement  First Year: Positive return 6%  Second Year: Positive return 6%  Third Year: Negative return 15%  Fourth Year: Negative return 8%  Ending Portfolio Value 
$85,000  
$238,000  
$358,000  
$955,000 
Part Three
After you have completed both charts, write answers to the following questions. Be prepared to share your answers in class discussion.