Question:Lab - Saving for Retirement

1.) You deposit $40,000 into a retirement account at the age of 20, making an average of 8% annual return. How much will you have at the age of 65?

2.) You are trying to decide if you have enough money to retire. You are expecting $2,500 a month from Social Security. You have $1.2 million in your retirement savings, and you only want to use the earnings to live on, which is at 3.5% annual rate. You are currently making $64,000 a year and plan to live on 80% of that amount. Do you have enough to retire based on these numbers?

3.) If you made $3,000 a year in contributions to your retirement account starting at the age of 25, making an average of 8% annual return, how much will you have at the age of 65?

4.) You think you need $1.5 million and your retirement advisor thinks you will average 6% a year on your account. How much will you need to contribute a year to your account if you have 40 years to your retirement?

5.) You are currently making $70,000 a year after taxes and are interested in maintaining your current income. If you are expecting $2,500 a month from Social Security, how much will you need to withdraw from your retirement accounts monthly?

6.) If you have $400,000 in your retirement account, and you are currently making 8% interest on your account, how much can you withdraw from it a year without decreasing the amount in your account?

7.) Your baby is born, and you want to make monthly payments into a college fund over the next 18 years. Your goal is to have $100,000 in the fund in 18 years. Assuming an APR of 5%, calculate how much you should deposit monthly?

8.) Assume that cigarettes cost $7 per pack and consider a 21 year old college student smoker who smokes 15 packs of cigarettes per month. If the student quits smoking and each month invests the amount she would have spent on cigarettes in a savings plan that averages a 4% annual return, how much will she have saved by the time she is 65?

9.) If you start contributing to your retirement account at the age of 18 with $25 a month and you increase your contributions by $5 a month per year, how much will you be contributing a month at the age of 40?

10.) Retirement Options, At age 25, you start work for a company and are offered two retirement options.

Retirement Option1: When you retire, you will receive a lump sum of $30,000 for each year of service.

Retirement Option 2: When you start to work, the company deposits $15,000 into an account that pays a monthly interest rate of 1%, and interest is compounded monthly. When you retire, you get the balance of the account.

Which option is better if you retire at age 65? Which option is better is you retire at age 55?