Retirement planning Hal Thomas, a 25-year-old college graduate, wishes to retire at

age 65. To supplement other sources of retirement income, he can deposit $2,000

each year into a tax-deferred individual retirement arrangement (IRA). The IRA will

earn a 10% return over the next 40 years.

a. If Hal makes annual end-of-year $2,000 deposits into the IRA, how much will he

have accumulated by the end of his sixty-fifth year?

b. If Hal decides to wait until age 35 to begin making annual end-of-year $2,000

deposits into the IRA, how much will he have accumulated by the end of his

sixty-fifth year?

c. Using your findings in parts a and b, discuss the impact of delaying making deposits

into the IRA for 10 years (age 25 to age 35) on the amount accumulated

by the end of Hal's sixty-fifth year.

d. Rework parts a, b, and c, assuming that Hal makes all deposits at the beginning,

rather than the end, of each year. Discuss the effect of beginning-of-year deposits

on the future value accumulated by the end of Hal's sixty-fifth year.