Hal Thomas, a 25 year old college graduate, wishes to retire at age 65. To supplement...

Hal Thomas, a 25 year old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2,000 each year into a tax-deferred individual retirement arrangement (IRA). The IRA will earn a return of 11% over the next 40 years.

a. - If Hal makes end-of-year $2,000 deposits into the IRA, how much will he have accumulated in 40 years when he turns 65?

b. - If Hal decides to wait until age 35 to begin making end-of-year $2,000 deposits into the IRA, how much will he have accumulated when he retires 30 years later?

c. - Using your findings in parts A and B, discuss the impact of delaying deposits into the IRA for 10 years (age 25 to age 35) on the amount accumulated by the end of Hal’s 65th year.

d. - Rework parts A, B, and C assuming that Hal makes all deposits at the beginning, rather than the end, of each year. Discuss the effect of beginning-of-year deposits on the future value accumulated by the end of Hal’s 65th year.

Expert Solution

Colby Messinger answered 11 months ago

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