The upgrade fee is $40 plus the cost of the phone plus taxes - that's for another 2 year contract.
Are you currently on a 2 year plan? If that plan ends soon; which is why your upgrade time is coming, you don't turn in that iPhone 4s, it is yours to keep.
Have you considered an Edge plan? They often make the next 2 years cheaper. What plan are you currently on? Single? More Everything? How many GB of data do you get each month?