Reference no: EM1316331
Calculate the salary at the end of 24th year from now from the facts
Choose the correct answer from the given option.
1. If you assume that your raises will just match the inflation rate (you estimate that inflation will average 3% a year for the next 25 year), what will you annual salary be just before you retire an 25 years?
2. What will 80% of your last year's salary be?
3. How much money will you need to have saved up in your 401K plan at the beginning of your retirement so that you can withdraw the amount (determined in question #2) each year for 20 years? Assume you can earn 10% on your money during your retirement years.
4a. Assuming you can cam 11% a year on your 401 K money over the next 25 years, how much will you need to save every year to reach your retirement goal in 25 years? (Ignore any matching component your employer will make and ignore any tax issues.)
4b. How much would you have to save every year if you earned just 8% a year on your money over the 25 years?
4c. How much would you have to save every year if you earned 14% a year on your money over the next 25 years?
5. Recalculate the answer for question # 4a (the 11% annual investment rate assumption) assuming you have:
a) 30 years to save
b) 20 years to save
c) 15 years to save
6. What total amount of money must you save to reach your retirement goal, assuming an 11% annual investment return while you save if you save for the following number of years?
(Remember to go back to your answer for question #4a to answer #6b.) Hint: just multiply the annual savings by the number of years you will be saving in each case.
a) 30 years
b) 25 years
c) 20 years
d) 15 years
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