A graduating student wants to compare the difference between investing now and i
ID: 2902530 • Letter: A
Question
A graduating student wants to compare the difference between investing now and investing later. A financial advisor who spoke to the student duggested that a Roth IRA would be a good investment for him to start.
If the student purchases a $1000 IRA when he is 25 years old and expects to earn an average of 4% per year compounded annually over 35 years (until he is 60), how much will accumulate in the investment?
if the student doesn't put the money in the IRA until he is 35 years old, how much money will accumulate in the account by the time he is 60 years old using the same retuen of 4%
How much less will he earn because he invested 10 years later?
Explanation / Answer
first case investment at 25 years
Return = 1000 * (1.04)^35 = $3946.08
Second case investment at 35 year age
Return = 1000 * (1.04)^25 = $2665.83
Loss for investing late = $1280.25