The ABC Company 401(k) Plan: a powerful wealth-building tool available to our employees

1. The ABC Company 401(k) Plan: a powerful wealth-building tool available to our employees As you pursue your financial goals in life – whether it’s paying off bills, buying or refinancing a home, or putting money aside for the future – there are a staggering array of decisions you need to make. So it’s nice when an opportunity comes along which is so compelling that it almost makes the decision for you! If you answered “no” to either of the above questions, you are missing out on a tremendous opportunity. The purpose of this article is to illustrate how participating in our 401(k) can benefit you over the long run, and urge you to take full advantage of this exciting program during your years of employment at ABC Company. 401(k) plans – What’s the big deal? Although employees’ current sentiments about their retirement plan often fluctuate with near-term performance of the stock market, the fundamental story behind 401(k) plans is more intact than ever. Over 40 million Americans now participate in these programs, and for some good reasons: • Employee contributions to 401(k) plans are made before federal income taxes, and this favorable treatment is recognized by most states. The pre-tax nature of 401(k) contributions allows you to put more money into the plan each year, so this money can go to work for you over time. • Interest, dividends and capital gains within your account build up on a tax-deferred basis, and are only taxed when funds are withdrawn (hopefully in retirement). The benefits of tax-deferred compounding can create a “snowball effect” over time, allowing your account to grow in size, particularly in later years when you have a larger base of investments. • Most 401(k) programs allow each participant to select a mix of investments that is most suited to their time horizon and investment goals. Our plan features an array of no-load mutual funds for you to choose from, allowing you to diversify your account and invest in a low-cost environment. • Thanks to increased limits, employees can now contribute more to their 401(k) plans. The pre-tax contribution limit for 2007 is $15,500. In addition, employees over age 50 can make a special “catch-up” contribution. This amounts to an additional $5,000 per year, for a total pre-tax contribution of $20,500 for those employees. The ABC Company 401(k) Plan should be a primary component ofyour overall financial picture. So here are two questions to ask yourself — Are you currently participating in the 401(k) plan? Are you saving as much as you can?

2. How can my 401(k) account grow over time? To show you the wealth-building power of your 401(k) plan, let’s assume we have two employees of ABC Company, Dan and Jill. Dan and Jill are each age 25, earning $20,000 per year, and planning to contribute to their 401(k) until retirement (age 65). Assume that Dan saves 6% of pay and Jill saves 10%, and both earn an annualized 8% rate of return within their account. Let’s see how they would fare by age 65 under this scenario: The ending account values for Dan and Jill, who are contributing 6% and 10% of pay to the 401(k) plan, respectively: As you can see, Dan’s final account value would be approximately $478,547 compared to $797,579 for Jill. Bear in mind that the total contributions made by Dan and Jill over their forty years of participation were $90,481 and $150,802, respectively. This shows you the tremendous wealth-building power that a 401(k) plan can have for you over long periods of time. Are you taking full advantage of the ABC Company 401(k) Plan to secure your long-term financial future? As you can see, the plan gives you a terrific means of investing for retirement, and is an important part of your total compensation picture. If you would like to enroll in the plan or increase your rate of savings, please follow the instructions on the attached form. As always, please call Human Resources with any questions you have on this exciting program. *This original draft of this piece was created by Federated Investors; it may not be used without Federated’s express consent. Illustration assumes starting salary of $20,000, annual contribution rates of 6% and 10% of pay, continuous participation without account distributions, an 8% annualized rate of return (with reinvestment of all earnings), and annual cost-of-living adjustments of 3%. Actual results will vary based on market conditions and performance, individual investment decisions and other factors. This illustration does not provide any guarantees regarding fund investment returns or matters of plan design. Always read the prospectus before investing. Not FDIC insured. No bank guarantee. May lose value.