Annie starts to save for her retirement right after she gets her first job at age...

Annie starts to save for her retirement right after she gets her first job at age 22. For twenty years, she puts $8,000 a year in her 401k and earns 10% for her investment. When she is 42, she stops making contribution but does not make any withdrawal until she retires at 65. How much would she have when she retired?

Annie’s sister, Amy, started her 401k when she is 40 years old and she wants to have the same amount as Annie has when she retires. How much does Amy need to save per year for 25 years? Assume Amy’s investment return is also 10%.

Expert Solution

a. How much would she have when she retired? = $4102861.34

1. Future value of Annie's annuity at age 42: $458199.99

2. Future value of Annie deposits at age 65 = $4102861.34

b. How much does Amy need to save per year for 25 years? = $41718.18

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jeff jeffy answered 1 year ago

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