Question
Show work on paper? Today, you celebrated your 24th birthday. You accepted a new job with a Fortune-500 company in Cincinnati. The firm provides you
Show work on paper?
Today, you celebrated your 24th birthday. You accepted a new job with a Fortune-500 company in Cincinnati. The firm provides you a 401-k plan, and your contribution are expected to be: $300 every month for first 11 years. After that, you increase your contribution by $300/month (your new contribution is $600/month) and stay at that level for next 15 years. After that, you increase your contribution by an additional $400/month (your new contribution is $1,000/month) and stay at that level for next 15 years, until your 65th birthday. The company matches your contribution at 75% and matched deposits are made once a year. The account provides interest at 5.4% per year compounded monthly. You want to retire on your 65th birthday, and you stop contributing to the 401-k plan. You determine that your monthly income needed for a retired lifestyle is $12,000 of which Social Security will provide $3,000. So, you need a net of $9,000 per month until age 90. The 401-k account will continue to pay interest at the same rate even during your retirement years. Is your current plan regarding the monthly deposits to 401-k sufficiently large to meet your retirement needs? If the deposits are insufficient, by how much additional money should you save per month to be deposited to a new account that is different and separate from 401-k, that pays the same interest? On the other hand, if your contribution is sufficient, how much money will you have in the account at age 90?
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