Question

Assume you are 25 and earn $37,000 per year, never expect to receive a raise, and plan to retire at age 55. If you invest 5 percent of your salary in a 401(k) plan returning 11 percent annually, and the company provides a $0.50 per $1.00 match on your contributions up to 3 percent of salary, what is the estimated future value of your 401(k) account? Once you retire, how much can you withdraw monthly if you want to deplete your account over 30 years? Click the table icon to view the future value annuity table E and to view the present value annuity table click this table icon m The estimated future value is $. (Round to the nearest cent.)

Answer 1

5% contribution of salary= 37000*5%= 1850

Employer contribution = 37000*3%/2 = 555

Total deposit = 2405

Using financial calculator
Input PMT=-2405

I/Y=11

N= 55-25=30

Solve for FV as 478645.21

This is the amount at retirement.

Using financial calculator
Input: PV= 478645.21

N= 30*12=360

I/y = 11/12

Solve for PMT as $4558.25

This is the monthly withdrawal.