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Consider that you are 45 years old and have just changed to a new job. You have $150,000 in the retirement plan from your former employer. You can roll that money into the retirement plan of the new employer. You will also contribute $7,200 each year into your new employer’s plan. If the rolled over money and the new contributions both earn an 8 percent return, how much should you expect to have when you retire in 20 years?

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TomShelby

Answer:

Value of the retirement accoutn after 20 years:  $ 1,028,629.71‬

Explanation:

future value of the 150,000 amount rolled over:

[tex]Principal \: (1+ r)^{time} = Amount[/tex]

Principal 150,000.00

time 20.00

rate 0.08000

[tex]150000 \: (1+ 0.08)^{20} = Amount[/tex]

Amount 699,143.57

future value of a 20 years anuity of 20 year at 8% interest rate:

[tex]C \times \frac{(1+r)^{time}-1 }{rate} = FV\\[/tex]

C 7,200.00

time 20

rate 0.08

[tex]7200 \times \frac{(1+0.08)^{20} -1 }{0.08} = FV\\[/tex]

FV $329,486.1429

Total amount after 20 years:

699,143.57 + 329,486.14 = 1,028,629.71‬

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