Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Ruby is 2 5 and has a good job at a biotechnology company. She currently has $ 9 , 6 0 0 in an IRA,

Ruby is 25 and has a good job at a biotechnology company. She currently has $9,600 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). Using Exhibit 1-A, Exhibit 1-B, Exhibit 1-C, Exhibit 1-D, answer the following questions.
a. How much will Ruby's IRA be worth when she needs to start withdrawing money from it when she retires? (Round discount factor to 3 decimal places and final answer to the nearest whole dollar.)
Worth of IRA
b. How much money will she have to accumulate in her company's 401(k) plan over the next 40 years in order to reach her retirement income goal? (Round discount factor to 3 decimal places and final answer to the nearest whole dollar.)
Money to accumulate
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Markets And Institutions

Authors: Jeff Madura

5th Edition

0324027443, 9780324027440

More Books

Students also viewed these Finance questions