Gary Kornig will be 30 years old next year and wants to retire when he is 65. So
ID: 2659986 • Letter: G
Question
Gary Kornig will be 30 years old next year and wants to retire when he is 65. So far he has saved (1) $5,520 in an IRA account in which his money is earning 8.3 percent annually and (2) $7,656 in a money market account in which he is earning 5.25 percent annually. Gary wants to have $1,000,000 when he retires. Starting next year, he plans to invest the same amount of money every year until he retires in a mutual fund in which he expects to earn 8.04 percent annually. How much will Gary have to invest every year to achieve his savings goal? (Round answer to 2 decimal places, e.g. 15.25.)
Explanation / Answer
future value of money in IRA account = 5520*(1.083^35) =89936.3089027
future value of money market account = 7656*1.0525^35 = 45896.0788014
future value needed from annual savings to make 1000000 = 1000000-45896.0788014-89936.3089027 =
=864167.612296
annual saving required = 864167.612296*0.0804/(1.0804^35 -1) =$4970.52
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