Reference no: EM133305535

The social security tax withholding rate is 6.2% for employees matched by another 6.2% for employers. The maximum amount of income subject to this combined 12.4% withholding rate is $147,000 in 2022. In 1992, the maximum amount subject to this combined 12.4% withholding rate was $55,500. This represents an annual growth rate of about 3.3%.

For 2023, the maximum amount subject to the 12.4% withholding rate is set at $160,200. For each subsequent year, assume the maximum amount grows by 3.3%. Assume, that the withholding amount for each year (for example 12.4% of $161,200 for 2023) is deposited as a lump sum into your personal Individual Retirement Account (IRA) at the end of each year earning 8% with annual compounding. What is the future value of your IRA at the end of 30 years? Hint: Calculate by setting up an excel spreadsheet for 30 years and find the future value term-by-term for each annual contribution (which varies) using the future value function in excel.

At the end of 30 years, you will retire and draw equal monthly amounts at the end of each month for the next 10 years until the IRA is depleted. The account continues to earn 8% but with monthly compounding. What is the monthly amount you can expect?