Question for Part 2: Retirement Options

Jack & Jill are two newlyweds and are aged 22, they are planning for retirement. They are hoping to retire in 45 years from todays date. They have a tight budget that they have to stick to currently, so they are pondering waiting for 10 years and then begin to invest $2700 each year to save for retirement. Jill has explained to Jack that more money can be saved if they put away $2700 each year for the following 10 years, this would mean that they would leave the money to sit for at least 35 years and not add any other payments to it. This would give them MORE for the time they are ready to retire in comparison to if they chose to wait 10 years to begin the investment for retirement and then start yearly payments for the next 35 years (which was their original plan).

Jack & Jill could use some advice on which decision would be best for them to make.

It will be assumed that all of their payments are being made at the END a year (or month), & that the rate of return for all yearly investments is 7.2% annually.

(There should be NO ROUNDING when finding rates for any of the following questions).

1) If Jack & Jill do Nothing for 10 years, and then decide to place $2700 each year in savings for the remaining 35 years?

2) If Jack & Jill put $2700 each year away for the next 10 years, how much money would they have then?

2b) How much would the amount from Question 2 grow if it is allowed to remain as an investment for the next 35 years (but with no added annual deposits being made)?

3) If Jack & Jill put away $2700 each year for 45 years, how much money will they have at the end of the 45 years?

4) How much money will Jack & Jill have if they save $225 per MONTH at the end of each month for the next 45 years? (Remember to adjust 7.2% annual rate to a Rate per month!)

If Jack & Jill decide to wait the 25 years before they were to put anything in savings, how much money would they have to put away in savings (at the end of each year) for the next 20 years to be able to reach $1,000,000 as the total saved on the day of their retirement in 45 years?