PART 1:
How old are you now? At what age do you hope to retire? 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 3.7% 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? PART 2: SEE ATTACHMENT The problem you must solve for Module 3 is:
1.
Consider the retirement plan you developed for yourself in the discussion board. Copy the
numbers you used there here: (You do not need to repeat the calculations again, but simply
restate your conclusions)
a) How much did you want to live on each year?
b) How many years until you retire?
c) How much did you determine you will need to save each month?
2.
3.
4.
5.
With the savings plan you developed in the discussion, the monthly payments might be difficult
to maintain or to pay at all. Suppose you decide to work for 7 more years until you retire.
a. What are your monthly payments with this plan?
b. How much more or less will you need to save compared to your discussion example?
c. How much interest will you earn? (Hint…interest = the difference between what you put
in and the total you have)
Now, suppose you can find a retirement account that earns 6.5% interest instead.
a. Using your retirement age from the discussion, and this new interest rate, re-calculate
your savings need.
b. How much interest will you earn in this case? (Hint…interest = the difference between
what you put in and the total you have)
Which is better for you- to work longer or to have a higher interest rate? Why do you say that?
Use your results from parts 1, 2 and 3 to back up your answer.
Why do you think you are you seeing the results you do? What is impacting the results?
**Reminder: Be sure to “talk through” the steps you are taking when working through the formulas.
Show your steps mathematically but explain them in words as well. For example, if you had the
formula:
Y = mx + b and were given that m = 5 x = 2 and b = -3 you might say something like:
To solve for y I first inputted the values I was given. The formula asks me to multiply m and x so I did 5
times 2 and got 10. Lastly I had to add b, which was -3. Since b was negative I subtracted 10 – 3 to get
an answer of 7.
There’s a lot of steps in this equation…talk through them. Tell what you did first, second, etc.
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