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(Solution document) Whats the best way to go by answering this question with instructions. You have exactly 28 years until retirement.


Whats the best way to go by answering this question with instructions. You have exactly 28 years until retirement. Today, you have the total retirement savings of $650,000 invested in a stock fund earning 10% return every year. You plan to keep that money in the same stock fund until your retirement. On top of that, you expect that for the next 28 years, you will be contributing to a retirement account earning 8% return per year (i.e. slightly below the typical return US stock have generated over long-term horizons throughout the history of US markets). You will be making deposits just once every year. You will deposit your first payment (C=$16,000) into your retirement account exactly one year from today. All your subsequent deposits will grow by 5% per year from your original deposit (so, your second year's deposit will be $C*(1+g), etc.). The last deposit will be made exactly 28 years from today. How much money will you retire with on the day of your retirement? 

 







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