PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
6th Edition
ISBN: 9781337117005
Author: Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher: Cengage Learning
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Chapter 14, Problem 6FPE
Summary Introduction
To compare: The both retirement plans and discuss the features of each plan.
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Suppose you have two job offers to consider for similar positions. Company A will pay a salary of $85,000 per year and offers the most common retirement plan 401(k) match, which is 50 cents for each dollar you contribute on up to 6% of your pay. Company B will pay a salary of $75,000 per year and offers a dollar-for-dollar match on up to 10% of your pay. Assume you spend 10 years working at the company, that salary and retirement contributions all occur monthly, and the average APR is 7%.
1. What are the balances on these two account options? Include both your contribution and the employers.
2. Explain which option you would take.
NEED BOTH PARTS
You have to decide whether or not to participate in the employer match program at your work. If you place 8% of your gross pay into a retirement account, your employer will match it. You plan to retire in 30 years. You expect to earn 6% return on your investment. How much will you have in the account if your average annual gross salary is $50,000?
A. $316,232.80
B. $22,973.96
C. $45,947.92
D. $632,465.60
Using the same information as the previous question, assume that you want to increase your portion of the contribution to 10%. The employer will only match up to 8%. How much would you have in this situation?
A. $692,523.80
B. $711,523.80
C. $316,232.80
D. $632,465.60
Molly Lincoln, a 25-year-old personal loan officer at First National Bank, understands the importance of starting early when it comes to saving for retirement. She has committed $3,500 per year for her retirement fund and assumes that she'll retire at age 65.
How much will Molly have accumulated when she turns 65 if she invests in equities and earns 8 percent on average? Round your answer to the nearest dollar.
Molly is urging her friend, Isaac Stein, to start his plan right away, too, because he's 45. What would his nest egg amount to if he invested in the same manner as Molly and he, too, retires at age 65? Round your answer to the nearest dollar.
2a. Nest egg at 4%
2b. Nest egg at 8%
Chapter 14 Solutions
PFIN (with PFIN Online, 1 term (6 months) Printed Access Card) (New, Engaging Titles from 4LTR Press)
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