In an effort to teach your child about the importance of investing early, show how much...

In an effort to teach your child about the importance of investing early, show how much impact on their retirement wealth forgoing one $4,000 IRA deposit will have if they are age 25 and plan to retire at age 65, and are assuming an investment portfolio that earns 7.5% per year.

Solutions

Expert Solution

We need to find the future value of missing one deposit of $4,000 for (65 - 25) = 40 years

FV = PV * (1 + r)^n

r = 7.5% = 0.075

FV = 4,000 * (1 + 0.075)^40

FV = 4,000 * 18.0442389698

FV = $72,176.9558792

The retirement account would be lower by $72,176.9558792 if we miss just one deposit of $4,000 for 40 years

jeff jeffy answered 2 years ago

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