In this case, Lisa will have contributed a total of $26,000 to her IRA before she stopped working. Therefore, after her final 13 th contribution at an annual rate of 7%, she will have accumulated a total fund of $43,100.9 as shown by the below chart.
| Age (Years) | IRA Contribution | Cumm IRA Balance Fv=[Pv(1+r) n ] |
|
20 |
2,000 |
2,140 |
|
21 |
2,000 |
4,429.80 |
|
22 |
2,000 |
6,879.87 |
|
23 |
2,000 |
9,501.46 |
|
24 |
2,000 |
12,306.56 |
|
25 |
2,000 |
15,308.02 |
|
26 |
2,000 |
18,519.58 |
|
27 |
2,000 |
21,955.95 |
|
28 |
2,000 |
25,632.87 |
|
29 |
2,000 |
29,567.17 |
|
30 |
2,000 |
33,776.87 |
|
31 |
2,000 |
38,281.25 |
|
32 |
2,000 |
43,100.94 |
| Total | 26,000 |
Delegate your assignment to our experts and they will do the rest.
The compounded Lisa IRA balance at age 65 will be: Fv = 43,100.94[(1+0.07) 33 ] = $401,931.47
For his husband Bob, at 65 years he will have contributed a total of $66,000. Therefore, at an annual rate of 7% his accumulated IRA balance will be $254,317.30 as shown by the below chart.
| Age | IRA Contribution | Cumm IRA Balance Fv=[Pv(1+r) n ] |
|
33 |
2,000 |
2,140 |
|
34 |
2,000 |
4,429.80 |
|
35 |
2,000 |
6,879.87 |
|
36 |
2,000 |
9,501.46 |
|
37 |
2,000 |
12,306.56 |
|
38 |
2,000 |
15,308.02 |
|
39 |
2,000 |
18,519.58 |
|
40 |
2,000 |
21,955.95 |
|
41 |
2,000 |
25,632.87 |
|
42 |
2,000 |
29,567.17 |
|
43 |
2,000 |
33,776.87 |
|
44 |
2,000 |
38,281.25 |
|
45 |
2,000 |
43,100.94 |
|
46 |
2,000 |
48,258.01 |
|
47 |
2,000 |
53,776.07 |
|
48 |
2,000 |
59,680.39 |
|
49 |
2,000 |
65,998.02 |
|
50 |
2,000 |
72,757.88 |
|
51 |
2,000 |
79,990.93 |
|
52 |
2,000 |
87,730.30 |
|
53 |
2,000 |
96,011.42 |
|
54 |
2,000 |
104,872.22 |
|
55 |
2,000 |
114,353.28 |
|
56 |
2,000 |
124,498.01 |
|
57 |
2,000 |
135,352.87 |
|
58 |
2,000 |
146,967.57 |
|
59 |
2,000 |
159,395.30 |
|
60 |
2,000 |
172,692.97 |
|
61 |
2,000 |
186,921.48 |
|
62 |
2,000 |
202,145.98 |
|
63 |
2,000 |
218,436.11 |
|
64 |
2,000 |
235,866.64 |
|
65 |
2,000 |
254,317.30 |
|
Total |
66,000 |
The compounded Bob IRA balance at the age of 65 will be $254,317.30
Though Bob contributed for a longer period than his wife Lisa, he did not accumulate as much money as Lisa did. Time value of money therefore come into concept in this case because Lisa contributed for a less period but due to longer investment period, she ended up accumulating more IRA balance than Bob.
