Consider that you are 35 years old and have just changed to a new job. You have

Question

Consider that you are 35 years old and have just changed to a new job. You have $89,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $4,500 each year into your new employer’s plan.

If the rolled-over money and the new contributions both earn a 7 percent return, how much should you expect to have when you retire in 30 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Explanation / Answer

Future value of annuity = P×[(1+r)^n-1]÷r

r is interest rate per period

P is payment per period

n is number of payments

Future value = P×(1+r)^n

P is payment

r is interest rate per period

n is number of periods

Future value of retirement account:

= $4,500×[(1+7%)^30-1]÷7%+$89,000×(1+7%)^30

= $1,102,564.23

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