401K(403B) Spreadsheet

Learning Objectives:

1. Familiarize students with the 401K(403B) retirement plan
2. Encourage students to enroll in 401K (403B)
3. Determine monthly cost of enrolling in 401K (403B) retirement plan
4. Apply future value concepts to determine amount of retirement savings
5. Discuss the intent of the 401K (403B)retirement account
6. Exposure to spreadsheet configuration for what if analysis

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Assignment: The purpose of this paper is to quantify the potential total retirement savings at post-graduation intervals for students.

1. Create a spreadsheet to determine retirement savings using the following criteria.

Annual Compensation: $60,000 (monthly $5,000)

401K (403B) Contribution Percent 6%

Company match 50% up to 6% (e.g. 3%- 50% x 6%)

Tax Rate 25%

Annual Investment Return Rate 8%

In your spreadsheet, each of these fields should be changeable. For example, if change the base pay to $48,000, your spreadsheet will calculate new retirement amounts. The intent of this exercise is also for you to learn how to do what if analysis for any of the key inputs on retirement savings. Please include your expected 401K (403B) balance at 10 year intervals as follows: 10 years, 20 years, 30 years, 40 years. Most of you will be 32, 42, 52 and 62 (ready for retirement) for these intervals.

Create your file to allow for what if analysis for the following variables:

1. annual salary
2. investment rate
3. contribution percent
4. company match percent

In your spreadsheet, highlight these fields in yellow indicating they can be modified to arrive at new retirement account balances.

1. Since 401K (403B) contributions are taken out pretax, I would like for you to calculate the difference in monthly take home pay under two scenarios:
   1. Without 401K (403B) contributions
   2. With 401K (403B) contributions (hint: this number will be lower, but will be offset by your savings net of taxes)

The intent of this calculation is to determine how much your take home (paycheck) will be reduced if you enroll in a 401K (403B).

Submission:

Your group submission will only be an excel spreadsheet that you will present in the classroom. No powerpoint or word document is required.

Remember, there is no right or wrong answer. The intent of this assignment is to encourage you to think critically about retirement savings when you have the opportunity post commencement to determine if you want to enroll in your company or organizations 401K (403B).

Files without formulas will earn a zero for this assignment.

File naming convention:

Keyword: 401K