FINC 331 Week 3 student discussion
Question Description
Please respond to Dana:
According to Federal Deposit Insurance Corporation (FIDC) (2016), the current average savings interest rate (as of 28 March, 2016) is 0.06 or 6% - the example rate given in the CNN Calculator (2016) was just 5%. For the purpose of this week’s discussion, I have changed the interest rate in the CNN calculator from 5% to the current national average of 6% found in the FDIC website.
At 51, if you contribute $0 now and $543 a week, by the time you reach retirement age of 70, your earnings will have reached your goal of $1,001,731. This comes to $2353 a month (if you consider 52 weeks a year versus 4 weeks a month). But if you contribute monthly as oppose to weekly, your earnings will drop to $992,447.
If starting at 25 with a retirement age of 65 and starting with $0 in savings, contributing $503 a month will earn your daughter a savings of $1,001,719. If we take the monthly cost and multiply by 12 (annual contribution) and then divide by 52 (weekly contribution), the weekly contribution will be $125 (rounded down) and the savings will increase to 1,084,193.
If starting at age 2 and having a goal to contribute until your grandson graduates from college (where he will then pick up the bill), you and your daughter could contribute $28 weekly cumulative, bringing the earnings to $56,245 by his 22ndBirthday. If he then deposits the $56,245 and continues the $28 weekly contribution for another 43 years, his retirement savings will turn into $1,036,677. If monthly payments were considered, then the payments would be $121 (rounded down) and would earn $1,026,195.
Retirement Savings
References:
CNN Calculator, (2016). Savings interest calculator. CNN Money. Retrieved fromhttp://money.cnn.com/calculator/pf/moneygrow/.
FDIC, (2016). Weekly national rates and rate caps. Federal Deposit Insurance Corporation. Retrieved fromhttps://www.fdic.gov/regulations/resources/rates/.
This question has not been answered.
Create a free account to get help with this and any other question!
Brown University
1271 Tutors
California Institute of Technology
2131 Tutors
Carnegie Mellon University
982 Tutors
Columbia University
1256 Tutors
Dartmouth University
2113 Tutors
Emory University
2279 Tutors
Harvard University
599 Tutors
Massachusetts Institute of Technology
2319 Tutors
New York University
1645 Tutors
Notre Dam University
1911 Tutors
Oklahoma University
2122 Tutors
Pennsylvania State University
932 Tutors
Princeton University
1211 Tutors
Stanford University
983 Tutors
University of California
1282 Tutors
Oxford University
123 Tutors
Yale University
2325 Tutors