Final answer:
To calculate Anne Thom's annual retirement deposits, an expected rate of return is needed. The power of compound interest indicates the importance of saving early for retirement. Investment fees such as administrative fees can significantly impact the long-term growth of retirement savings.
Step-by-step explanation:
Anne Thom is planning for her retirement at age 50 and wants to ensure that she can withdraw $60,000 at the end of each year for 30 years thereafter. To calculate how much Anne needs to deposit annually to meet her goal, assuming she starts with a $150,000 inheritance and has 25 years to save, we would need to know the expected rate of return on her investments. Unfortunately, this detail is missing, so we cannot provide an exact figure for the annual deposit required. However, to determine the required deposit amount, Anne could use methods like the future value of annuity and present value calculations, taking into account an estimated rate of return.
Considering the example of someone who saves diligently and wisely can benefit massively from the power of compound interest. For instance, a $3,000 investment at a 7% annual rate of return over 40 years would grow to nearly $44,923. This illustrates the importance of starting to save and invest early in life for retirement.
Should Anne be aware of investment fees, these could impact her savings significantly over time. For example, a fee of 0.25% on managed assets could reduce the effective rate of return, as seen in the comparison between direct investment and utilizing a retirement fund with such a fee. After 30 years, a retirement fund earning 4.75% instead of 5% would result in a lower end balance, illustrating the long-term effects of fees on investment growth.