Question

In: Finance

John is saving for retirement by contributing $20,000 a year to his 401(k) assuming that John...

John is saving for retirement by contributing $20,000 a year to his 401(k) assuming that John is currently 40 and is looking to retire at the age of 60 (Assume 7% returns). John wants to live of his investment earnings going forward Compute how much income he can expect a month with the investment income of 5% Annually.

Expert Solution

Currently John is 40 and contributes 20,000 a year till the age of 60. Total retirement amount schedule is as below:

Home / Financial Calculators / Future Value Calculator

Print

Future Value Calculator

The future value calculator can be used to calculate the future value (FV) of an investment with given inputs of compounding periods (N), interest/yield rate (I/Y), starting amount, and periodic deposit/annuity payment per period (PMT).

Number of Periods (N)
Starting Amount
Interest Rate (I/Y)
Periodic Deposit (PMT)		/period
PMT made at the beginning end of each compound period

Results

Future Value: $877,303.54

PV (Present Value)	$226,711.90
N (Number of Periods)	20.000
I/Y (Interest Rate)	7.000
PMT (Periodic Deposit)	$20,000.00
Starting Amount	$0.00
Total Periodic Deposits	$400,000.00
Total Interest	$477,303.54

Balance Accumulation Graph

PrincipalInterestBalance05101520$0$250.0K$500.0K$750.0K$1.0M

Breakdown

46%54%Periodic DepositsInterest

Schedule

	start principal	start balance	interest	end balance
1	$20,000.00	$20,000.00	$1,400.00	$21,400.00
2	$40,000.00	$41,400.00	$2,898.00	$44,298.00
3	$60,000.00	$64,298.00	$4,500.86	$68,798.86
4	$80,000.00	$88,798.86	$6,215.92	$95,014.78
5	$100,000.00	$115,014.78	$8,051.03	$123,065.81
6	$120,000.00	$143,065.81	$10,014.61	$153,080.42
7	$140,000.00	$173,080.42	$12,115.63	$185,196.05
8	$160,000.00	$205,196.05	$14,363.72	$219,559.77
9	$180,000.00	$239,559.77	$16,769.18	$256,328.96
10	$200,000.00	$276,328.96	$19,343.03	$295,671.99
11	$220,000.00	$315,671.99	$22,097.04	$337,769.03
12	$240,000.00	$357,769.03	$25,043.83	$382,812.86
13	$260,000.00	$402,812.86	$28,196.90	$431,009.76
14	$280,000.00	$451,009.76	$31,570.68	$482,580.44
15	$300,000.00	$502,580.44	$35,180.63	$537,761.07
16	$320,000.00	$557,761.07	$39,043.27	$596,804.35
17	$340,000.00	$616,804.35	$43,176.30	$659,980.65
18	$360,000.00	$679,980.65	$47,598.65	$727,579.30
19	$380,000.00	$747,579.30	$52,330.55	$799,909.85
20	$400,000.00	$819,909.85	$57,393.69	$877,303.54

Total investment at the age of 60 is $877,303.54.

5% of investment income earned annually.Yearly investment income=$877,303.54*0.05=$43,865.18

Monthly income =($43,865.18)/12= $3655

jeff jeffy answered 2 years ago

Steven is contributing to his 401(k) retirement plan. He contributes $3100 per year. His employer matches...

Steven is contributing to his 401(k) retirement plan. He contributes $3100 per year. His employer matches 50% of his contribution. If Steven can earn a 6% rate of return, how much (approximately) will he have in his account after 6 years?(Round your answer). $18433. $32435. $30806. $28572.

A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and...

A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account. 401(k) plans, named for the section of the tax code that governs them, arose during the 1980s as a supplement to pensions. Most employers used to offer pension funds. Pension funds were managed by the employer and they paid out a steady...

Burt is saving up for his retirement. Today is his 36th birthday. Burt first started saving...

Burt is saving up for his retirement. Today is his 36th birthday. Burt first started saving when he was 27 years old. On his 27th birthday, Burt made the first contribution to his retirement account when he deposited $2,000. Each year on his birthday, Burt has contributed another $2,000 to the account. The 10th (and last) of these contributions was made earlier today on his 36th birthday. The account has paid an effective annual rate of return of 5.4%. a)...

A is saving for her retirement and contributes $1000 to his account at the end of...

A is saving for her retirement and contributes $1000 to his account at the end of every year for 40 years. B is also saving for his retirement and contributes $950 to his account at the beginning of every year for 40 years. If they have the same amount of money after 40 years, what is the annual effective interest rate?

Suppose a recent random sample of employees nationwide that have a 401(k) retirement plan found that...

Suppose a recent random sample of employees nationwide that have a 401(k) retirement plan found that 22% of them had borrowed against it in the last year. A random sample of 130 employees from a local company who have a 401(k) retirement plan found that 16 had borrowed from their plan. Based on the sample results, is it possible to conclude, using αα = .05, that the local company had a lower proportion of borrowers from its 401(k) retirement plan...

Your employer provides a 401(k) retirement plan and matches 100% of your contributions up to 4%....

Your employer provides a 401(k) retirement plan and matches 100% of your contributions up to 4%. Your annual income is $90,000 and you expect to earn an annualized 7.0% return on your investment. What is the value of your 401(k) after 30 years if you contribute 4% of your annual income? What is the value if the return on investment is at a 5.0% annualized rate? How much of a difference would the 7.0% return scenario be if you stopped...

a) What is your opinion about 401(K) and IRA? b) How taxes can impact your retirement...

a) What is your opinion about 401(K) and IRA? b) How taxes can impact your retirement income and how can you stretch your retirement funds?

Richard and his dad decide to start saving for retirement at the same time. Richard is...

Richard and his dad decide to start saving for retirement at the same time. Richard is 20 years old and his dad is 40 years old. Both plan to put money into an IRA until they are 65. Both invest in the same things and earn the same rate of return which is 7%. Finally, in their retirement years, both believe they can score an APR of 4%. If they both want to receive $2,000 per month during retirement then...

MF has decided to start saving for his retirement. He will start at the end of...

MF has decided to start saving for his retirement. He will start at the end of this year saving $2000 a year for 10 years and $5,000 a year for the next 15 years after that. When he has finished with this period, he will still have 10 years left until he retires. The interest rate before retirement is 9.5% interest per year. After he retires the expected interest rate is 8%. If he wants to withdraw from his account...

Burt Sbeez is saving up for his retirement. Today is his 40th birthday. Burt first started...

Burt Sbeez is saving up for his retirement. Today is his 40th birthday. Burt first started saving when he was just 25 years old. On his 25th birthday, Burt made the first contribution to his retirement account when he deposited $3,000. Each year on his birthday, Burt has contributed another $3,000 to the account. The 16th (and last) of these contributions is made today. The account has paid interest at the rate of 4.2% APR, compounded monthly. Burt wants to...