SHOW ALL STEPS. NEED TO DOUBLE CHECK WORK

Complete the following two retirement scenarios as instructed. (Hint: draw a time line and see what you know for each time period and for which time period you know enough to calculate the present value or the future value of the cash flows.)

1) Tom is planning for a very early retirement. Tom would like to retire at age 40 and have enough money saved to be able to draw $250,000 per year for the next 40 years. Based on family history, he thinks it is likely that he will live to age 80. He plans to save by making 15 equal annual installments (from age 25 to age 40) into a fairly risky investment fund that he expects will earn 12% per year. He will leave the money in this fund until it is completed depleted when he is 80 years old. To make his plan work

a. How much money must Tom accumulate by retirement?

b. How much money will Tom draw out during his retirement?

c. How much must Tom pay into the investment each year for the first 15 years?

d. Compare the out-of-pocket savings to the investment value at the end of the 15 years to the withdrawals made during Toms retirement. Comment below on how these numbers could be so different, if they are. Use full sentences, please.

2) Toms sister, Janet, is also planning for retirement; however, she started saving for her retirement earlier than Tom since she expects that she will need more money for retirement based on the fact that women in their family usually live longer than men. She also is planning for a very early retirement. Janet would like to retire at age 40 and have enough money saved to be able to draw $250,000 per year for the next 50 years. Based on family history, she thinks it is likely that she will live to age 90. She plans to save by making 20 equal annual installments (from age 20 to age 40) into a fairly risky investment fund that she expects will earn 12% per year. She will leave the money in this fund until it is completed depleted when she is 90 years old. To make her plan work

a. How much money must Janet accumulate by retirement?

b. How much money will Janet draw out during her retirement?

c. How much must Janet pay into the investment each year for the first 20 years?

d. Compare the out-of-pocket savings to the investment value at the end of the 20 years to the withdrawals made during Janets retirement. Comment below on how these numbers could be so different, if they are. Use full sentences, please.

Comment also on how different Janets numbers are from Toms, if they are. Again, please use full sentences. Make sure to clearly give all reasons that they are different if they are.