For the following questions, assume you have just graduated and started a full-time job. At your job, you have the opportunity to begin investing in a 401k. Use 8% for your portfolio return, $50k for your first-year salary, 6% company match, 6% contribution, and annual salary increases of 4%.

1. Discuss the importance of a 401k?

2. Using time value of money equations, how much would you have saved by the time you retire in 45 years?

3. Based on your answer in question 2, how much could you withdraw each year in retirement if you took out the same amount each year if you live for 30 years once you start to retire?

4. If inflation averages 2% over the next 45 years, what is the value today of that lump sum value you calculated in question 2?

Now, let's assume you wait 10 years before starting to save for retirement...

5. Using time value of money equations, how much would you have saved by the time you retire in 35 years?

6. Based on your answer in question 5, how much could you withdraw each year in retirement if you took out the same amount each year if you live for 30 years once you start to retire?

7. If inflation averages 2% over the next 45 years (yes, still use 45 for this), what is the value today of that lump sum value you calculated in question 5?