PART 1
Answer the following questions.
(Note: You don't need to reveal private information here-your answers to questions 1 and 2 can be any numbers you choose and need not be about your true age and finances.)
How old are you now? (37 years old)
At what age do you hope to retire? (70 years old)
These questions are really about answering:
How many years do you have until you retire?
Based on how you want to live in retirement and any other sources of retirement income you have available, how much money do you think you will need to draw from this savings account each year during retirement?
You are about to set up a new retirement savings account that earns interest at a 3% annual interest rate (APR).
You want to make monthly contributions to that account from now until you retire.
The goal is to save enough money so that you will be able to withdraw the money you need each month without depleting your principal (in reality, you will probably deplete your principal gradually). How much money do you need to contribute to the account each month?
Be sure to answer all parts of the question above. Be sure to describe what you were able to solve.
PART 2
The problem you must solve is:
Consider the savings plan you developed in Part 1 How much did you determine you need to save each month?
You do not need to repeat those calculations here, but just re-state your conclusion.
With the 3% account, the monthly payments might be difficult to maintain, so you decide to wait 5 more years until you retire.
What are your monthly payments with this plan?
Suppose you can find an account that earns interest at 4% interest instead.
How does that change your monthly payments? (You choose how long until you retire in this question.)
State your conclusions and interpretations of these calculations.
To get full credit for this write-up, you should:
Answer all parts of the problem. Show your justification for every step in your solution. Use clear mathematically-accurate language. Label all numbers with the units they represent (e.g. 0.3048 ft/meter) Clearly state your conclusions using complete English sentences (for example,"Jill needs to add 43 gallons of water to her pool").