# *Precision *Financial Calculator

#### Example 5-1 __Annuity Calculation__

You 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)

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