Question

a) How does rate of return during the working years impact your final retirement amount?

b) How does the number of working years impact your expected contribution and the amount you will have saved at retirement?

Answer 1

PART A-

Rate of return and Final maturity amount are directly related to each other.

Other things remaining constant, higher the rate of return earned during working years, higher will be the maturity amount and vice-versa.

PART B-

Number of years and our periodical contribution are inversely related to each other. The more the years, the less we will have to deposit as periodic contribution and vice-versa

Other things remaining constant, the number of years and maturity amount are directly related to each other. The more the remaining years, the more will be the maturity amount. This is because, with more years remaining, we will earn interest on the same balance for longer period of time.

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