How much money will tom and tricia have

Reference no: EM131779568

Question: Planning for Retirement

Tom and Tricia are 22, newly married, and ready to embark on the journey of life. They both plan to retire 45 years from today. Because their budget seems tight right now, they had been thinking that they would wait at least 10 years and then start investing $2400 per year to prepare for retirement. Tricia just told Tom, though, that she had heard that they would actually have more money the day they retire if they put $2400 per year away for the next 10 years-and then simply let that money sit for the next 35 years without any additional payments-than they would have if they waited 10 years to start investing for retirement and then made yearly payments for 35 years (as they originally planned to do).

Help Tom and Tricia make an informed decision.

Assume that all payments are made at the end of a year, and that the rate of return on all yearly investments will be 9% annually.

a) How much money will Tom and Tricia have in 45 years if they do nothing for the next 10 years, then put $2400 per year away for the remaining 35 years?

b) How much money will Tom and Tricia have in 10 years if they put $2400 per year away for the next 10 years?

b i) How much will the amount you just computed grow to if it remains invested for the remaining 35 years, but without any additional yearly deposits being made?

c) How much money will Tom and Tricia have in 45 years if they put $2400 per year away for each of the next 45 years?

d) How much money will Tom and Tricia have in 45 years if they put away $200 per MONTH at the end of each month for the next 45 years? (Remember to adjust the 9% annual rate to a Rate per month!) (Round this rate per month to 5 places past the decimal.)

example of rounding: .062134 = .06213 or 6.213%

e) If Tom and Tricia wait 25 years (after the kids are raised!) before they put anything away for retirement, how much will they have to put away at the end of each year for 20 years in order to have $1,200,000 saved up on the first day of their retirement 45 years from today?

Reference no: EM131779568

Questions Cloud

Or you can request one payment today : You hit the Jackpot and you are offered a life payment of $50,000 per year. Or you can request one payment today (lump sum) to be paid immediately.

Identify specific barriers to social services : Identify specific barriers to social services that the Hernandez family experiences because of their class status (e.g., working poor).

Prepare a schedule to determine the total amount : Prepare a schedule that compares the two alternatives and expresses the respective cash flows in terms of their present value as of March

How much time the leader engages in two-way communication : How much time the leader engages in two-way communication. R2: Unable but willing (or confident)- Moderate readiness.

How much money will tom and tricia have : How much money will Tom and Tricia have in 45 years if they do nothing for the next 10 years, then put $2400 per year away for the remaining 35 years?

Determining the optimal company policy for sales by home : The costs to be considered in determining the optimal company policy for sales by Home

Identify the skills necessary to obtain that position : Identify a position within BI. Identify the skills necessary to obtain that position and what you would need to do to obtain these skills.

What amount is reported for pension expense : A tech firm sponsors a defined contribution pension plan for qualified employees. The firm contributes 4% of annual gross salary to the fund of the employee's.

Discuss the average issue price of the preferred stock : The stockholders' equity section on the December 31 balance sheet of Chemfast Corporation reported the following amounts

User Account

All Pages