Kailey_Soterhou_ThinkingAboutRetirement

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Thinking About Retirement Name: Kailey Soterhou Date: 12/29/2023 Thinking about your retirement at your current stage in life is the best possible way to plan for future. I know that retirement seems like a very long way off, but if you begin planning for it now, your future self will be grateful. The two most powerful tools you have at your disposal when it comes to setting yourself up well for retirement is time and compound interest. Compound interest is when the interest earned on an investment is added to the amount invested (or borrowed—it works against you when it comes to debt). Then, the interest rate is applied to the new, larger, balance. For example, if you had $1,000 invested at a rate of 10%, next year you would get to invest $1100 at 10%, and so on. The principal continues to grow even though you added no new money to the balance because of compound interest. Do this over the course of your lifetime, and you could have a lot of money when you get ready to retire! To test this theory, let’s play with an investment calculator that will help us calculate compound interest over a long period of time. Go to this website provided below or use a standard business calculator that can calculate compound interest. (The website is more fun.) Investment Calculator Use the investment calculator website or a standard business calculator to respond to the following scenarios and questions. 1. Imagine you started to save for retirement in college. At age 20, you start with $0.00 saved, but you began investing only $50 every month into a mutual fund that grew at a rate of 12% annually. If you planned to retire at age 65, how much money would you have when you retired? a. Record the following: Your results, Initial Balance, Contribution, Growth. (Contribution is the money your put into the investment each month over the lifetime of the investment. Growth is the money that was created through compound interest.) Your results: $1,072,736 Initial balance: $0 Contribution: $27,000 Growth: $1,045,736 b. What conclusions about retirement can you make based upon this retirement scenario? - In my assessment, commencing investments at a young age is highly advantageous as even a small monthly contribution can accumulate into a substantial sum by the time of retirement. This commendable retirement plan enables individuals to enjoy a financially secure and fulfilling retirement.

2. Now imagine that you did not invest early. You waited until you were 50 years old to save for retirement. Now that you are 50 years old, you have an established career and you can afford to really get after your retirement. Let’s say you invest $1,000 a month (with nothing currently saved) from age 50 to age 65 at grow rate of 12% annually, how much would you have for retirement? a. Record the following: Your results, Initial Balance, Contribution, Growth. Your results: $499,580 Initial balance: $0 Contribution: $180,000 Growth: $319,580 b. What conclusions about retirement can you make based upon this retirement scenario? - I believe it is not advisable to commence investing later in life. Although increasing the invested amount resulted in a higher sum, it remained lower than if the individual had initiated investments at an earlier age. This scenario is unfavorable as it entails contributing more funds each month, ultimately resulting in a lesser overall amount compared to starting investments at the age of 30, for instance. 3. Now run the calculator again, but this time you pick the numbers based on your real life. How old are you now? How much money could you reasonably save for retirement each month? What age would you like to retire? Do you have any money already saved? If you do, be sure to include that. What are your results? a. Record the following: Your results, Initial Balance, Contribution, Growth. Your results: $1,732,554 Initial balance: $0 Contribution: $29,400 Growth: $1,703,154 b. What conclusions about retirement can you make based upon your current retirement scenario? - In my analysis, I have determined that, regardless of the modest sum, commencing investments at this moment will yield a substantial amount for my retirement. This presents a remarkable prospect. Such a considerable sum of money would enable an individual to enjoy a highly satisfactory retirement.

4. Write one paragraph about the importance of saving for retirement at a young age. What do you think the keys are to successfully retirement planning? What are the consequences if you do not save for retirement or if you start too late. - It is crucial to start saving for retirement as early as possible in order to maximize your potential funds. Investing more and starting sooner allows your retirement funds more time to grow and increase in value. Taking advantage of compound returns by investing early and staying engaged can significantly benefit your retirement planning. Planning, investing, and saving is essential for a successful retirement. Setting aside money each month and investing it wisely is vital to ensure you have enough assets for a comfortable retirement. Failing to save for retirement can limit your options as you get older, such as losing the ability to choose where you want to live during retirement if you cannot make mortgage payments. It is important to note that government-managed retirement was never intended to be the sole source of retirement income. Social Security benefits, for example, may provide significantly less income than what you may expect or need. With pension plans becoming less common, taking advantage of the opportunity to save for your future is now more critical than ever.

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