Assume that your 401K investments will earn a 7% annual return and that you will
ID: 2721854 • Letter: A
Question
Assume that your 401K investments will earn a 7% annual return and that you will set aside 5% of your gross monthly income for 401K investment.Use excel to determine the balance on such a 401K after 40 years of investment for the high school graduate and for your expected income. Financial planners recommened having 70% of your gross annual income to live off of for each year in retirement. How many years will you and your highschool counterparts 40 year 401K savings last, if you use the 70% recommendation? HIGH SCHOOL GRADUATE INCOME-- $25,000 MY EXPECTED INCOME-- $49,870
Explanation / Answer
High School Graduate 25000 12 300000 5% 15000 (1+7%)^40 14.974 $ 224,616.87 You 49870 12 598440 5% 29922 (1+7%)^40 14.974 $ 448,065.73 High School Graduate 300000 70% $ 210,000.00 You 598440 70% $ 418,908.00 High School Graduate 224616.87/210000 1.070 Years You 448065.73/418908 1.070 Years