Module 9c: Starting a New Job
Lynn, age 30, is leaving her current job and starting a new job. She has a lump sum distribution
of $3,500. She would like to plan for retirement, but she would also like to pay some bills, take a vacation, and get a new wardrobe.
She is currently earning about 9% on the lump sum. She doesn't know when she will retire, but thinks that age 67 is about right. Lynn's options:
- Lynn could roll over the lump sum distribution into an IRA and the amount would continue to earn interest until she retires. Using a financial calculator, Lynn estimates that the $3,500 could grow
to $60,359 after 37 years if it earned 8% interest compounded annually.
- If she takes the lump sum distribution in cash, there will be a 10% penalty (because she is younger than 59 ½) and she will owe regular income taxes on the amount withdrawn.
Lynn needs to decide between having a small amount now or waiting until she retires.
Compound Interest Calculator
odule 9 - Module 9a | Module 9b | Module 9c | Module 9d