Question

Janine is 35 and has a good job at a biotechnology company. janine estimates that she will need $935,000 in her total retirement nest egg by the time she is 65 in order to have retirement income of $28,000 a year. (she expects that social security will pay her an additional $16,000 a year.) she currently has $2,000 in an ira, an important part of her retirement nest egg. she believes her ira will grow at an annual rate of 12 percent, and she plans to leave it untouched until she retires at age 65. how much money will janine have to accumulate in her company’s 401(k) plan over the next 30 years in order to reach her retirement income goal?

Answer 1

Janine will need to accumulate approximately $891,025 in her company's 401(k) plan, in addition to her IRA which will grow to around $59,921, to reach her total retirement goal of $935,000.

Step-by-step explanation:

Janine will need to accumulate $891,025 in her company’s 401(k) plan to reach her retirement income goal. The IRA investment growth and contribution to the 401(k) plan are key to her retirement planning.

Initially, Janine has $2,000 in her IRA, which is expected to grow at an annual rate of 12%. The formula for compound interest is A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($2,000), r is the annual interest rate (12%), n is the number of times that interest is compounded per year, and t is the time the money is invested or borrowed for. In this case, if the interest is compounded annually (n = 1) for 30 years, the IRA will grow to:

A = $2,000(1 + 0.12/1)^(1×30) = $2,000(1 + 0.12)^30 = $2,000 × 29.9603 approximately $59,921.

Subtracting this amount from her goal of $935,000, she will need to accumulate an additional $875,079 in her 401(k). However, this does not consider potential tax impacts, which could affect final numbers. For precise planning, these and any contributions during the period should also be considered.