Which investment strategy will result in a higher retirement

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Problem 1: Suppose after you graduate and begin receiving an income you start investing $6000 each year into a tax free retirement account that earns 8% per year. You do this for only 10 years, and then just leave it in the account earning 8% interest for the next 30 years when you decide to retire. Alternatively, you only start investing $6000 per year into this tax free account on the 11th year of employment, and keep investing annually for the remaining 30 years. Which investment strategy will result in a higher retirement fund at the end of 40 years of employment?

6000 * 1.03^10 = 944,611.03
6000 * 1.08^30 = $2,833,833.09

Reference no: EM132992507

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