Question

Taylor starts an IRA (Individual Retirement Account) at the age of 28 to save for retirement. She deposits $400 each month. The IRA has an average annual interest rate of 6% compounded monthly. How much money will she have saved when she retires at the age of 65 ? Round your answer to the nearest cent, if necessary.

Answer 1

Explanation:

To calculate Taylor's retirement savings, consider the following details:

Starting Age: 28 years old

Monthly Deposit: $400

Annual Interest Rate: 6% (compounded monthly)

Retirement Age: 65 years old

Steps to compute the future value:

Total Months of Contributions:

37 years x 12 months/year = 444 months

Monthly Interest Rate:

Annual interest rate / 12 = 0.005 (0.5%)

Compound Interest Formula:

Future value=$400×[(1+0.005) ^444−1]/0.005

Calculating this formula yields Taylor's estimated retirement savings of approximately $1,009,722.48.

Always round the answer to the nearest cent when necessary.