Question

In: Finance

Suppose you are just starting your retirement savings at age 25, and plan to retire at...

Suppose you are just starting your retirement savings at age 25, and plan to retire at age 70. Your goal is to save a million dollars in your IRA and you believe you can earn a 7% rate of return on your investment. How much must you contribute to your IRA each year to meet your goal?

Select one:

a. $22,222

b. $3,500

c. $619

d. $21,881

Solutions

Expert Solution

B) $3,500

Explanation: Using financial calculator (BA 2 plus) to calculate the yearly contribution

Inputs: N= 70 - 25 = 45

I/y= 7%

Pv= 0

Fv= 1,000,000

Pmt= compute

We get, yearly contribution to IRA as $3,500

jeff jeffy answered 2 years ago
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