a) You will start your first job in January 2018. Your financial advisor has recommended saving for retirement to ensure you have enough and to leverage the time value of money. The data for your situation follows:
Starting salary = $60,000 (at end of first year)
Annual raises = 5% p.a.
Current age = 25
Career = 40 years
ROR during career = 10%
Amount needed in first year of retirement = 80% of last year’s salary
Inflation in retirement = 3% p.a.
Determine the amount you will have in your account the day you retire. Provide a graph of the ending balances. Round monies to the nearest dollar and use the 1000 separator (,).
b. Using the results from (a), find the future value FV at the end of your career and conduct a sensitivity analysis to determine if you will have enough for retirement based on various savings rates and RORs.
Provide your observations about the results.