Sarah and John Stone of Seattle, Washington are a married couple in their mid-30s. They have two children, ages 9 and 7. Sarah and John have two main savings goals. They want each of their children to have $50,000 for college. And they want to retire comfortably 30 years from now. They currently have $55,000 saved for their children's college fund and they have $90,000 saved for retirement. Together the Stone's earn approximately $100,000 a year.
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Questions
1. The Stone's want to have $50,000 saved for each child by the time they are ready for college. Assume, both children will be ready for college at age 18. They currently have $55,000, if this is invested and earns a 5% rate of return (compounded annually), will they meet their savings goal?
2. The Stone's currently have $90,000 saved for retirement. How much will this be worth in 30 years, assuming a 5% rate of return (compounded annually) ?
3. The Stone's are also planning to add an additional $5,000 a year, for the next 30 years to continue to grow their retirement fund. Assuming a 5% rate of return (compounded annually) on this money how much will they have altogether?
4. How are the Stone's doing on meeting their savings goals? Please explain.
