Exercise 25

You are starting a new position, and your employer has a generous retirement plan. If you put $500 a month into a 401(k) plan, your employer will match your contributions.

1. Assume that you are 25 years old and plan to retire at age 65, how large can you expect your 401(k) pension to be when you retire? Assume that your 401(k) plan will collect interest at a rate of 5%.

2. If you begin withdrawing $60,000 every year at age 65, how long will your retirement fund last?