Question

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

Answer 1