Question
HalThomas, a 35-year-old collegegraduate, wishes to retire at age 60. To supplement other sources of retirementincome, he can deposit $2,200 each year into atax-deferred individual
HalThomas, a 35-year-old collegegraduate, wishes to retire at age 60. To supplement other sources of retirementincome, he can deposit $2,200 each year into atax-deferred individual retirement arrangement(IRA). The IRA will earn a return of 11% over the next 25 years.
a.If Hal makesend-of-year $2,200 deposits into theIRA, how much will he have accumulated in 25 years when he turns60?
b.If Hal decides to wait until age 45 to begin makingend-of-year $2,200 deposits into theIRA, how much will he have accumulated when he retires 15 yearslater?
c.Using your findings in parts a and b, discuss the impact of delaying deposits into the IRA for 10 years(age 35 to age 45) on the amount accumulated by the end ofHal's 60th year.
d.Rework parts a, b, and c assuming that Hal makes all deposits at thebeginning, rather than theend, of each year. Discuss the effect ofbeginning-of-year deposits on the future value accumulated by the end ofHal's 60th year.
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