Tim and Tom are twins.
Tim started an IRA when he was 20 years old. He deposited $2,000 in his IRA every year for 10 years. He doesn't want to make any more deposits, simply allowing his account to earn interest. He wants to retire when he is 65 years old.
Tom started his IRA when he was 30 years old. He deposits $2,000 in his IRA every year. He plans on doing this until he is 65 years old, when he plans to retire.
It turns out that Tim and Tom are actually triplets. They have a sister, Theresa, who started her IRA when she was 20 years old. She deposits $2,000 in her account every year. She plans on doing this until she is 65 years old, when she plans to retire.
As Tim, Tom, and Theresa's financial planner, your job is to determine how much each of them will have in their IRA accounts when they are ready to retire. To do this you will create a spreadsheet like the following:
Your spreadsheet should continue for 45 years, when the triplets will be 65 years old.
Keep in mind that you will be using formulas to determine the balances. For example, to determine the amount of money in an IRA, you would add the deposit to the current balance, then calculate the interest earned.
1. If everything continues according to their plans, how much will each triplet have in their IRA after 45 years? Print a copy of your spreadsheet that shows this outcome.
2. What interest rate will cause Tom’s balance to equal (within reason) Tim’s balance?
3. How many additional years of deposits (i.e., after the 45th year) would be needed for Tom’s balance to first exceed Tim’s balance?
4. How much could Theresa deposit (i.e., less than the current $2000) and still have her balance exceed Tim’s balance? Tom’s balance?
5. How much more would Tim need to deposit each year for his balance to match Theresa’s original balance? How much more would Tom need to deposit each year for his balance to match Theresa’s original balance?