A good simulation (No longer available ) after your students have some background knowledge on retirement plans. Here’s a good simulation from Betterment t that asks a series of questions and then provides a recommendation on where someone should put their savings. Here is what the calculator is trying to achieve:

This calculator aims to answer three important questions regarding your individual situation:

1) How much can you contribute to each type of Individual Retirement Account (IRA) account for the current tax year?

2) If you have an employer-sponsored plan, such as a 401(k) (most common), 403(b) or 457(b) (less common), should you invest in this plan, or an IRA, or both?

3) Which account is likely to be the most tax-efficient for contributions?

Let’s take a high school student scenario where she earns $3,000 in a summer job and want to invest $1,000 towards  retirement (since they know the power of compound interest)! Also, assume that the young worker’s company doesn’t offer a 401k plan.

Here is the advice that the calculator came up with:

We recommend investing $1,000 in a Roth IRA for you for 2016. You won’t get a tax deduction now, but withdrawals should be federally tax free if you’ve held the account for 5 years and are at least 59.5 years old.

This simple simulation will allow your students to have a context to discuss the various retirement plan investment options that will be available to them.

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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