Cover Story

TABLE: The Long Haul

How well you live in retirement depends in part on how well you run your 401(k)

plan. The amounts you and your company contribute are important, but even more

critical are the investments you choose. Here are four examples of people at

various ages and how they might launch or improve a 401(k) investment program.*

JUST STARTING

Age Retirement Age Current Income

27 67 $40,000

Contributes 5% of income

SUGGESTED ALLOCATION

SMALL-COMPANY STOCKS Risk level

21% High

LARGE-COMPANY STOCKS Expected return

35% 11.2%

BONDS Value at retirement

30% $2.2 million

0R

INTERNATIONAL STOCKS Risk level

44% High

SMALL-COMPANY STOCKS Expected return

26% 13.2%

BONDS Value at retirement

30% $3.6 million

If employee boosts his contribution to 6% of income, the final value grows to

$4.4 million.

*These examples were calculated using Prosper by Ernst & Young, a

personal-finance software program. It uses the following assumptions: The

maximum contribution an employee may make is $9,240--the 1995 limit; the

employer puts in $1 for every $4 the employee contributes--up to $5,000; and

there are 3% annual increases in income--and thus in contributions and in the

employer's maximum match.