1. George More is a participant in a defined contribution pension plan that offers a fixed-income fund as his only investment choice. He is 40 years old and has an accumulation of $100,000 in the fund. He currently contributes $1,500 per year to the fund. He plans to retire at age 65, and his life expectancy is age 80. Assuming the same 3% return, iIf George wanted a retirement annuity of $30,000 per year from the fixed-income fund, by how much would he have to increase his annual contribution
2. The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement.
Assume the before-tax interest rate is 5%. What will be your after-tax 20-year retirement consumption stream if you choose to save in a traditional IRA? Assume your tax rate is fixed at 30%. (Round your answers to 2 decimal place.)
3. The difference between a Roth IRA and a traditional IRA is that in a Roth IRA taxes are paid on the income that is contributed but the withdrawals at retirement are tax-free. In a traditional IRA, however, the contributions reduce your taxable income, but the withdrawals at retirement are taxable. Assume you plan to devote $5,000 to retirement savings in each year. You will retire in 30 years and expect to live for an additional 20 years after retirement.
What will be your 20-year retirement consumption stream if you choose to save in a Roth IRA? (Round your answers to 2 decimal place.)