Question

# Assume you make annual contributions to a Roth IRA of \$1,250 per year beginning on your...

• Assume you make annual contributions to a Roth IRA of \$1,250 per year beginning on your 25th birthday. Assume further that the account is projected to earn an annual return of 7.15% and that you will retire on your 65th birthday. What is the projected balance in the account on the date of your retirement? Assume no contribution on your 65th birthday. In other words, the last contribution occurs at the beginning of the 40th year, on your 64th birthday.
• Assume you begin making the contributions above on your 35th birthday, rather than your 25th birthday, but double the annual contribution to \$2,500. What is the projected balance in the account on the date of your retirement?
• If you wait until your 40th birthday to begin making contributions, how much do you have to contribute annually, to reach the same projected account balance on your 65th birthday, as if you had begun contributing at age 25? NOTE – This problem can be solved using the PMT() function or Goal Seek.

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