Question
June and John Garcia are a married couple in their early 40's, who live in Richland, Washington. They have two children, ages 11 and 9.
June and John Garcia are a married couple in their early 40's, who live in Richland, Washington. They have two children, ages 11 and 9. June and John have two main savings goals. They want each of their children to have $50,000 for college. And they want to retire comfortably 25 years from now. They currently have $65,000 saved for their childrens college fund and they have $150,000 saved for retirement. Together the Garcias earn approximately $120,000 a year.
Questions
1. The Garcia's want to have $50,000 saved for each child by the time they are ready for college. Assume, both children will be ready for college at age 18. They currently have $65,000, if this is invested and earns a 5% rate of return (compounded annually), will they meet their savings goal?
2. The Garcia's currently have $150,000 saved for retirement. How much will this be worth in 25 years, assuming a 5% rate of return (compounded annually) ?
3. The Garcias are also planning to add an additional $4,000 a year, for the next 25 years to continue to grow their retirement fund. Assuming a 5% rate of return (compounded annually) on this money how much will they have altogether?
4. How are the Garcias doing on meeting their savings goals? Please explain.
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