Question

QUESTION 21 Assume that you have 40 years until retirement and have just started your first job. Once you retire, you anticipate that you will live for 30 additional years. Assume that you will require $100.000 per year to support yourself in retirement. All investments that you make will go into and stay in an account that returns 7% per year ( ie, however much you have at retirement will sit in that account and continue to accrue interest on the remaining balance How much will you have to save each year over the next 40 years to meet your goal? Assume that your first investment occurs at the end of your first year of work lyr 1) and that the last of your 40 investments occurs on the last day that you are employed (yr 40). For simplicity, assume that your first withdrawal is at the end of your first retirement year yr 411

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

$100,000.00 Annual withdrawal during retirement No. of withdrawal Annual interest rate 30 7% Account value on retirement $1,240,904.12 Years until retirement Annual saving to achieve the goal $6,215.86

Cell reference -

Annual withdrawal during retirement 100000 No. of withdrawal Annual interest rate 30 0.07 Account value on retirement =PV(C4,C3,-C2,,0) 40 Years until retirement Annual saving to achieve the goal =PMT(C4,C8,,-C6,0) 10 11

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.