1. Sara is 30 years old and makes $40,000 per year. She has $10,000 in a traditional IRA, which is growing at 5%. She plans not to touch it until she retires at age 70.

Sara believes she will make $3,000 per month from Social Security. (LO 16-1)

a. With cost of living and merit salary increases, she estimates that she will be making $200,000 annually prior to retiring. How much should she budget for living expenses on a monthly basis after retirement?

b. How much will her IRA be worth at age 70?

c. Assuming that her IRA is growing at 5%, how much will Sara need to put in her company 401(k)

plan over the next 40 years in order to reach her retirement income goals?