Retirement planningPersonal Finance ProblemHal Thomas, a 35-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirementincome, he can deposit $2,500 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will earn a return of 15% over the next 30 years.

a. If Hal makes annual end-of-year $2,500 deposits into the IRA, how much will he have accumulated by the end of his 65th year?

b. If Hal decides to wait until age 45 to begin making annual end-of-year $2,500 deposits into the IRA, how much will he have accumulated by the end of his 65th year?

c. Using your findings in parts a and b, discuss the impact of delaying making deposits into the IRA for 10 years (age 35 to age 45) on the amount accumulated by the end of Hal's 65th year.

Questions

a. If Hal makes annual end-of-year $2,500 deposits into the IRA, how much will he have accumulated by the end of his 65^th year? (Round to the nearest cent.)

b. If Hal decides to wait until age 45 to begin making annual end-of-year $2,500 deposits into the IRA, how much will he have accumulated by the end of his 65th year? (Round to the nearest cent.)

c. Using your findings in parts a and b, which of the following options better describes the impact of delaying making deposits into the IRA for 10 years (age 35 to age 45) on the amount accumulated by the end of Hal's 65th year?

a. By delaying the deposits by 10 years, Hal is incurring a significant opportunity cost. This cost is due to both the lost deposits of $25,000 ($2,50010 yrs.) and the lost compounding of interest on all of the money for 10 years.

b. By delaying the deposits by 10 years, Hal is having a large capital gain. This gain is due to both the saved deposits of $25,000 ($2,50010 yrs.) and the gained compounding of interest on all of the money not deposited for 10 years.