g. Now let’s say you wait just 5 years before you start savingfor retirement, how much will that cost you in interest? How about10 years? How about just 1 year? (10 points) Now you need toconsider if that is enough. If you live to be 90 years old, wellabove average, then from the time you retire, to the time you are90, you will have to live on what you have in retirement (notincluding social security). So if you retired at 65, you will haveanother 25 years where your retirement funds have to last. h.Determine how much you will have to live on each year. Note, we areneither taking into account taxes nor inflation (which is about 2%a year). (5 points) Let’s look at this from the other directionthen, supposing that you wanted to have $50,000 a year afterretirement. i. How much would you need to have accumulated beforeretirement? (5 points) j. How much would you need to startinvesting each year, beginning right now, to accumulate thisamount? A “short-cut” to doing this is to first compute theeffective yield at your retirement age, then divide this amountinto Part (i). This is the amount you well need to invest eachyear. (5 points) k. That was just using $50,000, how much would youwant to have each year to live on? Dream big or reasonabledepending on your occupation! Now using that value, repeat parts(i) and (j) again. You need to state what you would want to live onand it needs to be something besides $50,000. (10 points) Youranswer to (k) would work, if you withdrew all of your retirementfunds at once and divided it up. However, if you left the money inthe account and let it draw interest, it is possible that theinterest itself would be enough to live on, or at the very least ifyou had to withdraw some of the principle, the remaining portionwould still continue to earn interest. Essentially, what you havefound is the upper bound for the amount of money that you will needto invest each year to attain your financial goals. l. Finish bysummarizing what you have learned in the entire project andconsider setting a goal towards saving for retirement. (Your answershould be in complete sentences free of grammar, spelling, andpunctuation mistakes.) This should be a paragraph not one sentence.(10 points)
