Pit Stop Summary: A 401(k) plan allows an employee to contribute a portion of their gross wages into an investment account to save for retirement. Employers often match this contribution (up to a limit and sometimes with vesting requirements) to encourage employees to save. You can always contribute more than your employer match. Taxes on the contributions and the investment earnings are deferred until the money is withdrawn during retirement. In Budget Challenge, you should maximize your 401(k) contributions while maintaining enough liquid cash to pay current expenses and potential unexpected events.

Navigation Tips:

  1. If your employer offers a 401(k), opt-in as soon as you are eligible.
  2. Maximize the employer match as much as possible.
  3. A 401(k) is for the long term. Withdrawing money early can be very costly.
  4. Consider an increase to your 401(k) contribution each time you receive an increase in pay.

Navigation Tips # 1:

  1. Select your 401(k) plan and contribution as a percent of your salary during “Vendor Selections.”
  2. The plan chosen determines the employer match, which is locked in for the duration of the simulation.
  3. During vendor selections, you can change your 401(k) percentage and plan choices on the Vendor Selections>Job tab.
  4. After the simulation begins, the only change you can make to your 401(k) is the contribution percentage at Student Home>401(k).

Navigation Tip # 2:

  1. It is important for you to understand you cannot withdraw money from their 401(k).
  2. The goal is to budget appropriately to keep enough money in your net pay to satisfy bills and even a bit more in case of any unexpected events.
  3. You can use the Paycheck calculator on the Job tab to view the Net Pay schedule as it relates to your 401(k) contribution percent selected.
  4. The system will highlight the row in the table that reflects your selection.

Navigation Tip #3:

  1. Throughout the Challenge, you can use the Budget and Cash Flow Spreadsheet to assess your cash and determine if your current 401(k) contribution leaves you with enough to pay bills on time.

OPEN THIS FILE AND READ AND DO IT–TOGETHER, ON YOUR OWN, OR WITH A PARTNER

  1. YOU WILL NEED THIS FILE TO DO THE HANDOUT ABOVE
  2. Answer the REST AREA FOLLOW UP QUESTIONS in a Google Doc shared with me.

NOW: Consider your other plans and estimate how much you will need to spend for all your other bills PER MONTH. Then you can decide how much to put away (which plan to pick) for the 401(K).

GO TO STUDENT HOME AND TAKE THE PRE TESTS & SURVEY FOR POINTS!!!