Date: Wed, 15 Sep 2004 08:36:58 CST
From: "BMS" 
Newsgroups: misc.invest.financial-plan
Subject: Re: Math on 401k Match
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	TLQIvSJKJDrqq/N2R+A2YPvnyYkJAF6jwJbBbZNXtUp9FipE+fEZvQ==
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The math you want to use is the same as an annuity. You are contributing 
1500 per year, say for the calculator it's ten years. Then using  your 
compounding rate to get the future value.
..

"Strater"  wrote in message 
news:ci55ei$n0d@library2.airnews.net...
>I frequently see posts touting a company match of X% on a 401k as 
>equivalent
> to a guaranteed return on your investment of X%.
>
> I have been trying to figure out a formula of the effect of a company 
> match
> in terms of compound interest percentage yield, and I realized that I am
> confused.  Because of compounding, I don't think I am comparing apples to
> apples.
>
> For example, if I make $10,000/year, and I contribute 10% to my 401k, and 
> my
> company matches 50% of that:
>
> 10,000 x .10 = 1,000
> 1,000 x .50 = 500
>
> Total = 1500
>
> This is a 50% return.
>
> After 10 years I would have $15,000 for my initial $10,000 investment.
> Again, a 50% return.  No argument there.
>
> However, this is not the same as a investing in a mutual fund that returns
> 50% per year, where an initial $10,000 investment compounded for 10 years 
> at
> 50% would be over $1 million.
>
> Probably obvious to everyone but me.
>
> Okay, given all that, does anyone know of a formula that does equate 
> company
> match to compound interest yield?
>
> What I'm getting at is this:  Having a company match of w% up to your 
> first
> x% is as good as getting an extra y% in compound interest rate over z 
> years.
>
> Or does that not even make any sense?
>
>
>