Saving for retirement is a very important element for workers today as most of you will not receive a pension when you retire. Therefore the onus is on you to save. The most commonly used retirement accounts are the 401(k) and the Individual Retirement Account or IRA. Money that you contribute into these accounts is pretax (i.e. they are contributed before the government taxes your income), and grows tax free until you withdraw it. a. You invest $6000 a year for your entire working career starting at 22 and finishing at 65 (i.e. you make 44 equal contributions). How much do you have invested at age 65 ? Assume that your savings will earn 8% per year. How much of the total final value comes from contributions and how much from compound interest? b. You wait until you turn 32 to begin investing $6000 per year (still assuming 8% rate of return). How much will you have invested at age 65 ? c. How much do you need to invest every year if you want to retire with $1,000,000 ? Again, assuming an 8% rate of return. (note: do this for both a starting age of 22 and 32 ). d. It is highly unlikely that you will contribute the same amount to retirement throughout your working life. Assume that you start saving $6000 a year at age 22 and increase this value by 3% every year as your salary increases. How much will your final contribution be at age 65 ? (note: there are 44 total contributions) If you receive an 8% RoR how much will be in your retirement account at age 65 ? e. You have decided that a comfortable retirement means drawing $50,000 (in 2019 dollars) from your retirement account yearly (this will be in addition to your social security income). How many 2063 dollars will you need to withdraw during the first year of your retirement? A general rule of thumb (called the 4% rule) states that you can safely withdraw 4% of the balance of your retirement funds. Assuming an interest rate of 8% and an inflation rate of 2.5% determine the required amount in your retirement accounts in both 2019 and 2063 dollars. Saving for retirement is a very important element for workers today as most of you will not receive a pension when you retire. Therefore the onus is on you to save. The most commonly used retirement accounts are the 401(k) and the Individual Retirement Account or IRA. Money that you contribute into these accounts is pretax (i.e. they are contributed before the government taxes your income), and grows tax free until you withdraw it. a. You invest $6000 a year for your entire working career starting at 22 and finishing at 65 (i.e. you make 44 equal contributions). How much do you have invested at age 65 ? Assume that your savings will earn 8% per year. How much of the total final value comes from contributions and how much from compound interest? b. You wait until you turn 32 to begin investing $6000 per year (still assuming 8% rate of return). How much will you have invested at age 65 ? c. How much do you need to invest every year if you want to retire with $1,000,000 ? Again, assuming an 8% rate of return. (note: do this for both a starting age of 22 and 32 ). d. It is highly unlikely that you will contribute the same amount to retirement throughout your working life. Assume that you start saving $6000 a year at age 22 and increase this value by 3% every year as your salary increases. How much will your final contribution be at age 65 ? (note: there are 44 total contributions) If you receive an 8% RoR how much will be in your retirement account at age 65 ? e. You have decided that a comfortable retirement means drawing $50,000 (in 2019 dollars) from your retirement account yearly (this will be in addition to your social security income). How many 2063 dollars will you need to withdraw during the first year of your retirement? A general rule of thumb (called the 4% rule) states that you can safely withdraw 4% of the balance of your retirement funds. Assuming an interest rate of 8% and an inflation rate of 2.5% determine the required amount in your retirement accounts in both 2019 and 2063 dollars