Discuss 3 retirement planning strategies. List the pros and cons of each strategy. Write in complete sentences.
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The three strategies we will discuss are: 1) Employer-sponsored retirement plans (like 401(k) plans), 2) Individual Retirement Accounts (IRAs), and 3) Real estate investment. Show more…
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You want to save $$\$ 2,000$$ today for retirement in 40 years. You have to choose between the two plans listed in (i) and (ii). i. Pay no taxes today, put the money in an interest-yielding account, and pay taxes equal to $20 \%$ of the total amount withdrawn at retirement. (In the United States, such an account is known as a regular individual retirement account [IRA].) ii. Pay taxes equivalent to $30 \%$ of the investment amount today, put the remainder in an interest-yielding account, and pay no taxes when you withdraw your funds at retirement. (In the United States, this is known as a Roth IRA.) a. What is the expected present discounted value of each of these plans if the real interest rate is $1 \%$ ? $10 \%$ ? b. Which plan would you choose in each case?
Now write down a long-term savings goal, such as saving for college, a house, or retirement. Explain some methods you might use to achieve this goal.
Scenario: Based on what you learned in this course, how would you invest for your future if you were 30 years old, planning to retire at age 70 and planning to live 20 years beyond retirement? Consider the following factors: include basic rent (1st ten yrs.) and mortgage thereafter; and basic expenses but not including healthcare (assumes employer ins. until retirement) and miscellaneous. You will have total income avg. of $50,000 for the first 10 yrs., with $10,000 for savings/investment after expenses; an average of $60,000 yearly income for the second 10 years with an average of $5,000 per year for savings and investment after paying your mortgage payments of $1440 per month starting at age 47 (mortgage is for 30 years). Your average yearly income will be $73,500 for the 20 years following that, leaving $8,000 per year for savings and investment. You forecast that your social security will bring in $28,000 per year and you want to own your home outright by the time you retire. The car payments will be completed by age 70. You figure you need around $40,000 minimum per year to live on. • How would you invest and save over the years from age 30 through retirement so that you are comfortable? Explain.
Akash M.
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