Calculate the annual retirement saving if the saving period is 25 years. The annual retirement withdrawal...
Calculate the annual retirement saving if the saving period is 25 years. The annual retirement withdrawal will be $60,000 and the retirement will last for 20 years. The interest rate is 10%.
Please round your answer to the first decimal.
Homework Answers
First, we need to find the present value of retirement annual withdrawal;
PVA = Annuity x [{1 - (1 + r)-n} / r]
= $60,000 x [{1 - 1.10-20} / 0.10]
= $60,000 x [0.8514 / 0.10] = $60,000 x 8.5136 = $510,813.82
Now, we will treat this PVA of retirement withdrawals as FVA of retirement savings
Annuity = [FVA x r] / [(1 + r)n - 1]
= [$510,813.82 x 0.10] / [1.1025 - 1]
= $51,081.38 / 9.8347 = $5,193.99, or $5,194
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