Activity: Funding 401(k)s and Roth IRAs
Objective: The purpose of this activity is to learn tocalculate 15% of an income to save for retirement and to understandhow to fund retirement investments.
Directions: Complete the investment chart based on the factsgiven for each situation. Assume each person is following Dave’sadvice of investing 15% of their annual household income. Rememberto follow the sequence of contributions recommended in thelesson.
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 theremainder in her Roth.
- Tyler & Megan can each fund a Roth, then put the remainderin the 401(k). With no match, fund the Roth first (based on 2011contribution of $5,000 per individual).
- Adrian is not eligible to open a Roth IRA because he makes toomuch money. He will put his entire 15% into his 401(k).
- David & Britney are still within the guidelines for amarried couple (based on 2011 contributions of $5,000 perindividual). After maxing out the IRA, they will fund the401(k).
- Brandon will fund his 401(k) up to the match, then put theremainder in his Roth.
- Chelsea will fund her Roth IRA.
