Jacqueline Strauss, a 25-year-old personal loan officer at First National Bank, understands the importance of starting early when it comes to saving for retirement. She has designated $3,000 per year for her retirement fund and assumes that she’ll retire at age 65.
a. How much will she have if she invests in CDs and similar money market instruments that earn 4 percent on average?
b. How much will she have if instead she invests in equities and earns 10 percent on average?
c. Jacqueline is urging her friend, Mike Goodman, to start his plan right away because he’s 35. What would his nest egg amount to if he invested in the same manner as Jacqueline and he, too, retires at age 65? Comment on your findings.