Your employer contributes $250 per month into an IRA that pays 5.4% APR.
a. How much will you have to retire on after 30 years?
b. How much longer will you have to work (and keep contributing) to have 50% more than this amount?
a). Employer matches the employee contribution for the IRA so monthly deposit = 250*2 = 500
PMT = 500; rate (monthly rate) = 5.4%/12 = 0.45%; N (number of deposits) = 30*12 = 360, solve for FV.
Amount at the time of retirement will be 448,306.69
b). Amount desired at the time of retirement = 448,306.69*(1+50%) = 672,460.03
FV = 672,460.03; PMT = 500; rate = 0.45%, solve for NPER.
Number of deposits required = 435.05 or rounding to the next highest number, 436.
Extra number of years = (436 - 360)/12 = 6.254
Work life would need to be increased by 6.254 years.
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