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You have just taken a new job and are planning on investing in a 401(k) plan immediately, this will allow you to make your
You have just taken a new job and are planning on investing in a 401(k) plan immediately, this will allow you to make your first annual contribution in one year's time. At that time, your firm will let you invest up to 6% of your annual salary of $50,000, and match your investment with an additional 3%. You have worked with your financial advisor to estimate the investments will earn 8% per year. a) If you make the maximum annual contributions for 30 years, how much will you have in your pension fund in 30 years? (Please enter your answer as a positive number) b) If your salary of $50,000 this year grows annually by 3% and you make the maximum annual contributions for 30 years, how much will you have in your pension fund in 30 years? (Please enter your answer as a positive number) After planning the contributions in part b) above, you are now working out your withdrawals from the pension fund. You have decided to plan on 20 annual withdrawals, with the first withdrawal occurring 31 years from today. You anticipate on moving your funds to a less risky investment immediately on retirement in 30 years. Consequently, you expect to earn a lower rate of return of 6% on the funds beginning at that time. c) Assuming that you're planning on 20 equal annual withdrawals, what can the amount of those withdrawals be? d) If you wish to ensure that your withdrawals will grow through your retirement at a 3% rate, what will your first withdrawal be?
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SOLUTION To calculate the values requested lets break down the problem into steps a To calculate the amount you will have in your pension fund after 30 years considering the maximum annual contributio...Get Instant Access to Expert-Tailored Solutions
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