You want to receive 5,000 per month in retirement and you expect to need the income...

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You want to receive 5,000 per month in retirement and you expect to need the income...

You want to receive 5,000 per month in retirement and you expect to need the income for 25 years. How much do you need to have in your account at retirement, assume that money in the account earn 6% compounded month?

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Answer 1

Answer #1

Amount payment = $5,000
Period = 25 years or 300 months

Annual interest rate = 6.00%
Monthly interest rate = 0.50%

Present value of payments = $5,000/1.005 + $5,000/1.005^2 + … + $5,000/1.005^299 + $5,000/1.005^300
Present value of payments = $5,000 * (1 - (1/1.005)^300) / 0.005
Present value of payments = $5,000 * 155.206864
Present value of payments = $776,034.32

So, you need to have $776,034.32 or $776,034 in your account at retirement.

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Answer 2

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