Precision Financial Calculator Precision Financial CalculatorYou have a 401(K) savings plan with your current employer. You receive your paychecks twice a month. You decide to contribute 5% of your gross income to your 401(K) plan, which is equivalent to $200 per paycheck. You expect your salary will be raised 3% every year and you would like to keep the 5% contribution ratio. You select smooth growing mutual funds as your investment markets. The average annual rate of return for these funds is about 8%. Assuming you will retire 15 years later, by that time how much money will be in your account?
[Answer: $165,342.55]
[Procedures]
Go to the Annuity Savings tab. Select Percentage Increase as the Type of Deposits. Enter 3% as the increase rate per year. Select Twice a Month as the Deposit Period (24 deposits per year). Enter deposit amount $200, interest rate 8%, Number of Years 15, then click Calc button. You get the answer. Go to the Schedule tab to check how your savings grow annually. You can have a better idea by going to view the graphics. Also, from the pie chart of the Summary tab of the chart window, you will find that of this amount, almost 50% comes from the interest accrued.
Try different scenarios. For example, assume you just rolled up $25,000 to this 401(K) account from your previous employer, see how much you can have at that time. (Answer: $248,180.00)