Ruby is 25 and has a good job at a biotechnology company. She currently has $10,000 in an IRA, an important part of her retirement nest egg. She believes her IRA will grow at an annual rate of 8 percent, and she plans to leave it untouched until she retires at age 65. Ruby estimates that she will need $875,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $20,000 a year (she expects that Social Security will pay her an additional $15,000 a year). (LO 14.2)
a. How much will Ruby’s IRA be worth when she needs to start withdrawing money from it when she retires? (Hint: Use Exhibit 1-A in the Appendix to Chapter 1, Time Value of Money.)
b. How much money will she have to accumulate in her company’s 401(k) plan over the next 40 years in order to reach her retirement income goal?
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Ruby is 25 and has a good job at a biotechnology company. She currently has $10,000 in an IRA, an im...
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