Activity: Funding 401(k)s and Roth IRAs

Objective: The purpose of this activity is to learn to calculate 15% of an income to save for retirement and to understand how to fund retirement investments.

Directions: Complete the investment chart based on the facts given for each situation. Assume each person is following Daves advice of investing 15% of their annual household income. Remember to follow the sequence of contributions recommended in the lesson.

Investments	Annual Salary	Company Match	401(k)	Roth IRA	Total Annual Investment
Joe	$40,000	1:1 up to 5%
Melissa	$55,000	1:2 up to 6%
Tyler & Megan	$105,000	No Match
Adrian	$111,000	1:1 up to 3%
David & Britney	$150,000	No Match
Brandon	$35,000	2:1 up to 6%
Chelsea	$28,000	No Match

• Joe will take advantage of the company match (5% of salary) then put the rest in a Roth IRA
• Melissa will fund the 401(k) up to the match and put the remainder in her Roth.
• Tyler & Megan can each fund a Roth, then put the remainder in the 401(k). With no match, fund the Roth first (based on 2011 contribution of $5,000 per individual).
• Adrian is not eligible to open a Roth IRA because he makes too much money. He will put his entire 15% into his 401(k).
• David & Britney are still within the guidelines for a married couple (based on 2011 contributions of $5,000 per individual). After maxing out the IRA, they will fund the 401(k).
• Brandon will fund his 401(k) up to the match, then put the remainder in his Roth.
• Chelsea will fund her Roth IRA.