2. A person deposits $3,000 annually in a retirement account that earns 8 percent. a. How much will be in the account when the individual retires at the age of 65 if the savings program starts when the person is age 40? (LO 7.1 and 7.4) b. How much additional money will be in the account if the saver defers retirement until age 70 and continues the contributions? (LO 7.1 and 7.4) c. How much additional money will be in the account if the saver discontinues the contributions at age 65 but does not retire until age 70? (LO 7.1 and 7.4)
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a. How much will be in the account when the individual retires at the age of 65 if the savings program starts when the person is age 40? ** Show more…
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(A) A man deposits $$\$ 2,000$$ in an IRA on his 21 st birthday and on each subsequent birthday up to, and including, his 29 th (nine deposits in all). The account earns $8 \%$ compounded annually. If he leaves the money in the account without making any more deposits, how much will he have on his 65th birthday, assuming the account continues to earn the same rate of interest? (B) How much would be in the account (to the nearest dollar) on his 65 th birthday if he had started the deposits on his 30th birthday and continued making deposits on each birthday until (and including) his 65th birthday?
At the end of each quarter, a 51-year-old individual puts $1600 in a retirement account that pays 7.7% interest compounded quarterly. (a) When the individual reaches age 60, what is the value of the account? (b) If no further deposits or withdrawals are made to the account, what is the value of the account when the individual reaches age 65? (a) Up to age 60, the individual's deposits form an because the deposits are made at the of each period. Therefore, the formula should be used. After age 60, the account to behave as an annuity and formula should be used. When the individual reaches age 60, the value of the account will be $. (Do not round until the final answer. Then round to the nearest cent as needed.) (b) When the individual reaches age 65, the value of the account will be $. (Do not round until the final answer. Then round to the nearest cent as needed.)
Sri K.
I've seen a few different answers on here for this question, not sure which one is right. In this exercise, we consider the effects of starting early or starting late to save for retirement. Assume that each account considered has an APR of 6% compounded monthly. At age 20, you realize that even a modest start on saving for retirement is important. You begin depositing $50 each month into an account. What will be the value of your nest egg when you retire at age 65? Against expert advice, you begin your retirement program at age 40. You plan to retire at age 65. What monthly contributions do you need to make to match the nest egg from part a? Compare your answer to part b with the monthly deposit of $50 from part a. Also compare the total amount deposited in each case. Let's return to the situation in part a: At age 20, you begin depositing $50 each month into an account. Now suppose that at age 40, you finally get a job where your employer puts $400 per month into an account. You continue your $50 deposits, so from age 40 on, you have two separate accounts working for you. What will be the total value of your nest egg when you retire at age 65?
Arjun K.
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