Assume that you begin saving 3% of your total income in an employer-provided retirement plan at work. Each year, your income increases by 4%. As a result, you increase the percentage of your income you devote to your retirement plan by 2%. How long will it take for you to be saving at least 20% of your income? (Assume no taxes.)Based on your calculations from part a, how much will you be saving (using the end-of-year savings rate) over the next 10 years if you earn $30,000 this year?What is an alternative approach you might recommend for this situation? Why might it be better?

The savings of the employee are increasing by fix rate of 2% each year, while the income is…

Answered: Assume that you begin saving 3% of your…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assume that you begin saving 3% of your total income in an employer-provided retirement plan at work. Each year, your income increases by 4%. As a result, you increase the percentage of your income you devote to your retirement plan by 2%. How long will it take for you to be saving at least 20% of your income? (Assume no taxes.)
Based on your calculations from part a, how much will you be saving (using the end-of-year savings rate) over the next 10 years if you earn $30,000 this year?
What is an alternative approach you might recommend for this situation? Why might it be better?

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