Assignment Week 3 Financial Decisions

Assignment Week 3 Financial Decisions - the end of every...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Assignment Week 3 Financial Decisions 4-45. You have just turned 30 years old, have just received your MBA, and have accepted your first job. Now you must decide how much money to put into your retirement plan. The plan works as follows: Every dollar in the plan earns 7% per year. You cannot make withdrawals until you retire on your sixty-fifth birthday. After that point, you can make withdrawals as you see fit. You decide that you will plan to live to 100 and work until you turn 65. You estimate that to live comfortably in retirement, you will need $100,000 per year starting at the end of the first year of retirement and ending on your 100th birthday. You will contribute the same amount to the plan at
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: the end of every year that you work. How much do you need to contribute each year to fund your retirement? 4-46. Problem 45 is not very realistic because most retirement plans do not allow you to specify a fixed amount to contribute every year. Instead, you are required to specify a fixed percentage of your salary that you want to contribute. Assume that your starting salary is $75,000 per year and it will grow 2% per year until you retire. Assuming everything else stays the same as in Problem 45, what percentage of your income do you need to contribute to the plan every year to fund the same retirement income?...
View Full Document

This note was uploaded on 11/15/2010 for the course MSA Audit taught by Professor Mark during the Spring '10 term at Strayer.

Ask a homework question - tutors are online