Question

18. Based on using the Rule of 72.  Consider the following:
    1. Investor receives an average annual return of 10.2% for the total length of their investment
    2. Investor is 23 years old during first year of investment
    3. Investor makes $50,000 in first year (at age 23)
    4. Investor saves 15% in their 401K in year one (at age 23) of their $50,000 salary.
    5. Investor receives a 5% investment match (based on the investor’s annual salary at age 23) from their employer in their 401K for first year
    6. Investor only contributes to their 401K in first year (at age 23)

Questions:

20.1) Approximately how many years would it take the investor to double their total 401K investment?

20.2) Approximately how many times will the 401K investment double, if the investor retires at age 67?

20.3) Approximately how much will the 401K investment be at age 67?

20.4) If the investor waits 7 years to make their first and only investment into their 401K (same details as in year 1 – age 23, except, now the investor is 30 – assume same salary and contribution/matching percentages as at age 23), what would be the approximate value of the 401K investment at age 67?

Answer 1