2) John has an annual income of $100,000. He saves 5% of his income in a...
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2) John has an annual income of $100,000. He saves 5% of his income in a 401K account. His company matches his 401K contribution up to 5%. He also has savings of $30,000 that he plans to invest along with his 401K investments. He is now 32 years old and plans to retire at age 67. Assume that we know with certainty that he will die at age 88. John faces three mutual fund choices: Fund A has 4% front load which is eliminated after the account reaches a $40,000 threshold, and 1.3% annual operating expenses. Fund B has no loads and 1.3% operating expenses. Fund C is a passive index fund, has no loads and 0.3% operating expenses. Assume that all three funds have an expected return of 8%. Once John retires, he will put all his savings in a money market account that will yield 4%. John doesn't have any children and plans to exhaust all his savings before he dies (you can think of this as an annuity to age 88). What will be John's monthly income in retirement from his investments assuming he invests in Fund A? What about Fund B and Fund C? 2) John has an annual income of $100,000. He saves 5% of his income in a 401K account. His company matches his 401K contribution up to 5%. He also has savings of $30,000 that he plans to invest along with his 401K investments. He is now 32 years old and plans to retire at age 67. Assume that we know with certainty that he will die at age 88. John faces three mutual fund choices: Fund A has 4% front load which is eliminated after the account reaches a $40,000 threshold, and 1.3% annual operating expenses. Fund B has no loads and 1.3% operating expenses. Fund C is a passive index fund, has no loads and 0.3% operating expenses. Assume that all three funds have an expected return of 8%. Once John retires, he will put all his savings in a money market account that will yield 4%. John doesn't have any children and plans to exhaust all his savings before he dies (you can think of this as an annuity to age 88). What will be John's monthly income in retirement from his investments assuming he invests in Fund A? What about Fund B and Fund C?
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