Compound My Interest in 401(k)s

Janelle found herself staring long and hard at the 401(k) Enrollment form provided on the first week of her employment at Atlas Healthcare. It seemed so long ago that her High School Personal Finance teacher had her complete a similar project. Still it seemed a long way off until she would need to worry about retirement savings. To get her thinking about retirement, she decided to write a few sentences to her future self about her plans.

Now, if she could only find her old notes, she would be all set, as the forms were due to the Human Resources Department by 9am Friday.

The first question Janelle needed to answer regarded whether she wished to participate and how much of her salary she wanted to set aside.

The first question on the form had the following language:

____ Yes, I request that my company defer my compensation by ________%.

____ No, I waive my right to defer any compensation at this time

She knew that she wanted to participate (that had been seared into her memory by her high school teacher), but as for how much to set aside, that question puzzled her. She had just started her first job and didnt have a real handle on her spending habits as an independent adult with the rent, food and other assorted costs that came with it. She wished she could wait a few months to sign up for the 401(k) when she had a better budget planned for every month. However, she feared she would forget and lose the opportunity to have her contribution matched by the company. Her company had one of the more generous 401(k) match programs in that they matched 50% of every dollar she contributed up to 10% of her salary. She also came across this neat chart which provided her with additional motivation:

Exhibit 1

Answer This:

2. What percentage of her salary should Janelle contribute?

3. How could Janelle have made this investing decision easier for herself?

4. Should the companys match program impact her savings decision?

5. Other than a 401(k), are there other saving goals that Janelle should have?

Compound My Interest in 401(k)s Janelle found herself staring long and hard at the 401/k) Enrollment form provided on the first week of her employment at Atlas Healthcare. It seemed so long ago that her High School Personal Finance teacher had her complete a similar project. Stll t seemed a long way off until she would need to worry about retirement savings. To get her thinking about retirement, she decided to write a few sentences to her future self about her plans. Compound My Interest in 401(k)s Janelle found herself staring long and hard at the 401/k) Enrollment form provided on the first week of her employment at Atlas Healthcare. It seemed so long ago that her High School Personal Finance teacher had her complete a similar project. Stll t seemed a long way off until she would need to worry about retirement savings. To get her thinking about retirement, she decided to write a few sentences to her future self about her plans