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retirement planning

37) Your sister turned 35 today, and she is planning to save $7,000 per year for retirement, with the first deposit to be made one year from today. She will invest ina mutual fund that's expected to provide a return of 7.5% per year. She plans to retire 30 years from today, when she turns 65, and she expects to live for 25 yearsafter retirement, to age 90. Under these assumptions, how much can she spend each year after she retires? Her first withdrawal will be made at the end of her firstretirement year.
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Answer #1
Step 1: FInd out how much she will have in 30 years:

(using financial calculator)

30 N (# years)
7.5 i (Return on investment)
0 PV (current value)
7000 PMT (yearly payment)
Solve for FV = $723,795.81

Step 2: Now that we have the value we can solve for how much she can withdraw

25 N (# years expected to live)
7.5 i (return on investment)
-723,795.81 PV (current value of investment)
0 FV (she plans to use all the money)
solve for pmt = 64,932.20

She will be able to withdraw $64,932.20 every year from her retirement.
answered by: anushan
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