You began saving for retirement at age 25 by contributing $550 per month at an APR of 6% compounded monthly. You plan to retire at the age of 65 and live on your retirement nest egg. 1) How much money is in your account on retirement age at 65? 2) What is the total amount of your deposits over 40 years? 3) Compare that amount of money in your account to the total deposits made over the time period. Explain your observation as a percentage of your contribution to the total balance.
You began saving for retirement at age 25 by contributing $550 per month at an APR of 6% compounded monthly. You plan to retire at the age of 65 and live on your retirement nest egg.
1) How much money is in your account on retirement age at 65?
2) What is the total amount of your deposits over 40 years?
3) Compare that amount of money in your account to the total deposits made over the time period. Explain your observation as a percentage of your contribution to the total balance.
4) After working 40 years, you decide to retire. Suppose you set up your account as perpetuity on retirement paying an APR of 6% compounded monthly. If the value of your nest egg (that is, the present value) is the amount found in question #1, what will be your yearly income and your monthly income (round both to the nearest dollar)?
Monthly perpetuity yield = Nest egg times Monthly interest rate
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