1. If Bozena participates and the 401(k) earns 10 percent annually, how much will she have accumulated in 45 years (to age 67) even if her salary does not change?

2. If she does not participate and annually saves $1,600 on her own, how much will she have accumulated if she earns 10 percent and is in the 20 percent federal income tax bracket?

3. If she retires at age 67, given the amounts in (1) and (2), how much can Bozena withdraw and spend each year for 20 years from each alternative? Assume she continues to earn 10 percent (before tax) and remains in the 20 percent federal income tax bracket.

4. If her salary grows, what impact will the increase have on the 40l (k) plan? To illustrate the effect on her accumulated funds, assume a $5,000 increment every five years so that she is earning $72,000 in years 41-45 (ages 63-67).

5. What are the risks and potential returns associated with each of the six alternative funds?

6. Who bears the risk associated with Bozenas retirement income? 7. Why does Ken not have to make these investment decisions? What are the risks associated with his retirement plan?

8. At this point in Bozenas life, which alternative(s) do you suggest she select?

Ken Saffaf’s 22-year-old daughter Bozena has just accepted a job with Doctor Medical Systems (DMS), a firm specializing in computer services for doctors. DMS offers employees a 401(k) plan to which employees may contribute 5 percent of their salary. DMS will match $0.50 for every dollar contributed. Bozena’s starting salary is $32,000, so she could contribute up to $1,600 and DMS would contribute an additional $800. If she did decide to contribute to the plan, she has the following choices of funds, all managed by Superior Investments. She may select any combination of the funds and change the selection quarterly.