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What do you see as Chris' opportunity cost?
My name is Chris. I am 25 years old, have a full-time job, and earn a decent salary. I have outlined a savings plan that I think will work for me. I plan to contribute $2,000 this year to a tax-free IRA that has been giving about 9% interest per year. I'll do this for the next nine years also, for a total of 10 years of investing. Because I hope to marry, own a home, and stop working to raise my children, I'll stop contributing after 10 years and leave the money in the IRA alone until I turn 65 and retire."
3 Answers
- Anonymous1 decade agoFavorite Answer
the best is to contribute the max into your IRA , the max the goverment will allow , if you need to switch your withholdings to a higher number , you can contribute up to 5000 , if you pay less in taxes everyweek you can do this ...
Source(s): also a good rule of thumb is to invest into companies that you send checks to each month , like your electric company , phone company , cable company , make money off the companies that make money off you ! - 1 decade ago
Investing at 9% at 65 you will have about $250,000. If you choose a investment that averages 12% you'll end up with close to $700,000. If you were to keep contributing $2000/yr at 12% all the way through 65 you'll end up with $2.2 Million.
You could retire making $220,000/yr (or 10% of the total amount)and never touch the principal on your account.
You don't have to stop contributing your husband can contribute to your IRA even if you are not working.
I will recomend you to choose a more agressive investment for your IRA.
Keep up the good work.
Source(s): http://rigoonfinances.blogspot.com/ - Kiran CLv 71 decade ago
You should post this question in the Ecomonics section. Opportunity cost is what Chris gives up if he invests the money in a IRA.
If you are trying to fiqure out what Chris loses if he stops investing after 10, you need to calculate future values of the investment if he stops after and the future value of the investment if he continued to invest to age 65.
