Decision #2: Planning for Retirement Erich and Mallory are 22, newly married, and ready to embark on the...

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Decision #2: Planning forRetirement
Erich and Mallory are 22, newly married, and ready to embark onthe journey of life. They both plan to retire 45 yearsfrom today. Because their budget seems tight right now, they hadbeen thinking that they would wait at least 10 years and then startinvesting $3000 per year to prepare for retirement. Mallory justtold Erich, though, that she had heard that they would actuallyhave more money the day they retire if they put $3000 per year awayfor the next 10 years - and then simply let that money sit for thenext 35 years without any additional payments – then they wouldhave MORE when they retired than if they waited 10 years to startinvesting for retirement and then made yearly payments for 35 years(as they originally planned to do). Pleasehelp Erich and Mallory make an informeddecision:
Assume that all payments are made at the END a year(or month), and that the rate of return on all yearly investmentswill be 7.2% annually.
(Please do NOT ROUND when entering “Rates” for any ofthe questions below)
How much money will Erich and Mallory have in 45 years if theydo nothing for the next 10 years, then put $3000 per yearaway for the remaining 35 years?
How much money will Erich and Mallory have in 10 years if theyput $3000 per year away for the next 10 years?
b2) How much will the amount you just computed grow to if itremains invested for the remaining
35 years, but without any additional yearly deposits beingmade?
How much money will Erich and Mallory have in 45 years if theyput $3000 per year away for each of the next 45 years?
How much money will Erich and Mallory have in 45 years if theyput away $250
per MONTH at the end of each monthfor the next 45 years? (Remember to adjust 7.2% annualrate to a Rate per month!)
If Erich and Mallory wait 25 years (after the kids are raised!)before they put anything away for retirement, how much will theyhave to put away ***at the end of* *eachyear*** for 20 years in order to have $1,000,000 savedup on the first day of their retirement 45 years from today?

Answer & Explanation Solved by verified expert

3.7 Ratings (685 Votes)

So answering your first question f they ideally do nothing for 10 years and invest for rest of 35 years from the 45 years than the total amount which they will get is as shown in below table So the amount that Erich and Malory would get after 45 years and investing for 35 years with 10 years doing nothing would be 4644309116 In ten years they will have 4485566749 If they invest for staring ten years and keep the amount for next 35 years then the amount would be as shown in below table Yearly amount invested Cumulative amount Interest Outstanding Rate of return Interest amount Compounded amount 3000 72 216 3216 3000 6216 72 447552 6663552 3000 9663552 72 695775744 1035932774 3000 1335932774 72 9618715976 1432119934 3000 1732119934 72 1247126353 1856832569 3000 2156832569 72 155291945 2312124514 3000 2612124514 72 188072965 2800197479 3000 3100197479 72 2232142185 3323411698 3000 3623411698 72 2608856423 388429734 3000 418429734 72 See Answer

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Decision #2: Planning forRetirementErich and Mallory are 22, newly married, and ready to embark onthe journey of life. They both plan to retire 45 yearsfrom today. Because their budget seems tight right now, they hadbeen thinking that they would wait at least 10 years and then startinvesting $3000 per year to prepare for retirement. Mallory justtold Erich, though, that she had heard that they would actuallyhave more money the day they retire if they put $3000 per year awayfor the next 10 years - and then simply let that money sit for thenext 35 years without any additional payments – then they wouldhave MORE when they retired than if they waited 10 years to startinvesting for retirement and then made yearly payments for 35 years(as they originally planned to do). Pleasehelp Erich and Mallory make an informeddecision: Assume that all payments are made at the END a year(or month), and that the rate of return on all yearly investmentswill be 7.2% annually. (Please do NOT ROUND when entering “Rates” for any ofthe questions below)How much money will Erich and Mallory have in 45 years if theydo nothing for the next 10 years, then put $3000 per yearaway for the remaining 35 years?How much money will Erich and Mallory have in 10 years if theyput $3000 per year away for the next 10 years?b2) How much will the amount you just computed grow to if itremains invested for the remaining35 years, but without any additional yearly deposits beingmade?How much money will Erich and Mallory have in 45 years if theyput $3000 per year away for each of the next 45 years?How much money will Erich and Mallory have in 45 years if theyput away $250per MONTH at the end of each monthfor the next 45 years? (Remember to adjust 7.2% annualrate to a Rate per month!)If Erich and Mallory wait 25 years (after the kids are raised!)before they put anything away for retirement, how much will theyhave to put away at the end of eachyear for 20 years in order to have $1,000,000 savedup on the first day of their retirement 45 years from today?