Question
Suppose that you are 30 years old today, and that you are planning on retirement at age 65. Your annual salary currently is $70,000, and
Suppose that you are 30 years old today, and that you are planning on retirement at age 65. Your annual salary currently is $70,000, and you expect your salary to increase at a rate of 3 percent annually as long as you are working. You plan on making annual contributions to a retirement account so you can save up for your retirement. Your first contribution will be made on the day you turn 31 and will be a constant percentage of this year's salary, in addition, you expect to deposit a constant percentage of your salary each year until you reach 65 years old. Assume that the interest rate is 8 percent.
1. You expect to have $250,000 in your retirement account when you retire at age 65. What percentage of your salary must you save each year?
Suppose that you're 30 years old today, and that you are planning on retirement at age 65. Your annual salary currently is $70,000, and you foresee your salary to remain constant for the entire work period. Your sister promises to save $7,000 every year from the day you turn 31 years old until you turn 65 (the first deposit is made on your 31st birthday). When you turn 65 years old, she will give the savings to you as a birthday present. To save up for your retirement, you additionally plan on making annual contributions to a retirement account. Your first contribution will be made on the day you turn 31 and will be 12 percent of this year's salary. Furthermore, you expect to deposit 12 percent of your salary each year until you reach 65 years of age. Assume that the interest rate is 6 percent. On the day you turn 65, how much do you have if you receive the present from your sister and withdraw all the savings from your retirement account?
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