Question
1. Carla Lopez deposits $3,000 a year into her retirement account. If these funds have an average earning of 7 percent over the 40 years
1. Carla Lopez deposits $3,000 a year into her retirement account. If these funds have an average earning of 7 percent over the 40 years until her retirement, what will be the value of her retirement account?
2. Ruby is 25 and has a good job at a biotechnology company. She currently has $10,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year).
a. How much will Rubys IRA be worth when she needs to start withdrawing money from it when she retires? (Hint: Use Exhibit 1-A in the Appendix to Chapter 1, Time Value of Money.)
Years to retirement = 40
Her current IRA = $10,000
Annual growth rate = 8%
b. How much money will she have to accumulate in her companys 401(k) plan over the next 40 years in order to reach her retirement income goal?
Total nest egg required by age 65 = $875,000
3. You have $100,000 in your retirement fund that is earning 5.5 percent per year, compounded quarterly. How many dollars in withdrawals per month would reduce this nest egg to zero in 20 years? How many dollars per month can you withdraw for as long as you live and still leave this nest egg intact?
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