Starting today,Alicia is going to contribute $100 a month to her retirement account.Her employer matches her contribution by 50 percent.If these contributions remain constant,and she earns a monthly rate of .55 percent,how much will her savings be worth 40 years from now?

Question

Quizplus · Accepted Answer

To calculate the future value of Alicia's retirement savings, we consider her monthly contribution, her employer's 50% match, and the monthly interest rate of 0.55%. Alicia contributes $100, and her employer adds another $50 (50% of $100), making the total monthly contribution $150. Using the future value formula for an annuity, where the future value $FV = P \times \frac{((1 + r)^n - 1)}{r}$, $P$ is the total monthly contribution ($150), $r$ is the monthly interest rate (0.55% or 0.0055), and $n$ is the total number of contributions (480, since 40 years x 12 months = 480), we calculate the future value of her savings. Plugging in the values, we get $FV = 150 \times \frac{((1 + 0.0055)^{480} - 1)}{0.0055}$, which calculates to approximately $354,087.88.

Starting Today,Alicia Is Going to Contribute $100 a Month to Her