You want to retire at age 65, you begin your investment program at 25 with a one

Question

You want to retire at age 65, you begin your investment program at 25 with a one time deposit of $5,000 in a traditional IRA. On this investment you can earn 11% in the Vanguard 2055 retirement fund. At age 35 you come into an inheritance of $15,500 of which you decide to put into a Roth IRA, using a Fidelity index fund which you anticipate will yield 9.5% until 65. At 45 you remember taking Elliott's class and listening to Bryan Washburn and Mark Russell and you realize that you have $14,000 extra saved for retirement. To be super safe you invest this sum in another Roth IRA which you will receive a 7% return. At 65 you want to retire at $120,000, grow a year for 30 years, (you need this much because you didn't factor in Inflation, (Elliott was too nice and didn't want you be depressed) and you anticipate you can earn 4% on the payout or annuity, not perpetuity. With all of this information, and it is not too much info how much will you need to invest each year at 10%, beginning at 25 to 65, using a mutual, traditional IRA account to achieve your retirement goal of $120,000 gross for 30 years? part A. The second part: remember Bryan Washburn and Mark Russell indicated we are looking for tax-free income at retirement, and thus, you are the 25% tax bracket at retirement, how much will you net each year in retirement, after taxes?

Explanation / Answer

Ans;

A) Deposit amount                  5,000 years for depositing                        40 rate 11% Future value (value at age 65)        325,004.34 b) Deposit amount                15,000 years for depositing                        30 rate 9.5% Future value (value at age 65)        228,304.69 c) Deposit amount                14,000 years for depositing                        20 rate 7.0% Future value (value at age 65)          54,175.58 d) annutiy value              120,000 years                        30 rate 3.5% to fund this plan          1,221,526 e) PVAND30 = $120,000 (PVIFA.10,5) (1 + .10)
= $120,000 (3.791) (1.1)
= $500,412
FVAN30 = $500,412 = PMT (FVIFA.10,30) = PMT 53,083 f) Asfter tax income tax rate 30% After tax income                84,000

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