Question
P 5-22 Retirement planning Personal Finance Problem HalThomas, a 35-year-old collegegraduate, wishes to retire at age 65. To supplement other sources of retirementincome, he can
P 5-22 Retirement planning
Personal Finance ProblemHalThomas, a 35-year-old collegegraduate, wishes to retire at age 65. To supplement other sources of retirementincome, he can deposit $2,100 each year into atax-deferred individual retirement arrangement(IRA). The IRA will earn a return of 14% over the next 30 years.
a.If Hal makesend-of-year $2,100 deposits into theIRA, how much will he have accumulated in 30 years when he turns 65?
b.If Hal decides to wait until age 45 to begin makingend-of-year $2,100 deposits into theIRA, how much will he have accumulated when he retires 20 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 65th 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 65th year.
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