Question: Consider a person who begins contributing to a retirement plan
Consider a person who begins contributing to a retirement plan at age 25 and contributes for 40 years until retirement at age 65. For the first ten years, she contributes $3,000 per year. She increases the contribution rate to $5,000 per year in years 11 through 20. This is followed by increases to $10,000 per year in years 21 through 30 and to $15,000 per year for the last ten years. This money earns a 9 percent return. First compute the value of the retirement plan when she turns age 65. Then compute the annual payment she would receive over the next 40 years if the wealth was converted to an annuity payment at 8 percent.
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