Question

Question Help You are planning for a very early retirement. You would like to retire at age 40 and have enough money served to be able to withdraw $220,000 per year for the next live to age 80) You plan to save by making 10 equal annual installments (from age 30 tage 40) into a fityisky investment fund that you expect will earn 8% per year. You will leave the money in this und untis years based on family history you think you will completely depleted when you are 80 years old (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table) (Click the icon to view Future Value of $1 table.) Click the loon to view Future Value of Ordinary Annuity of Stable) Read the requirements Requirement 1. How much money must you accumulate by retirement to make your plan work? Mint. Find the present value of the $220,000 withdrawal) (Round your find answer to the whole dar) To make the plan work, you must accumulate $ by retirement Requirement 2. How does this amount compare to the total amount you will withdraw from the investment during retirement? How can these numbers be so different? Over the course of your retirement you will be withdrawings However, by age 40 you only need to have invested These numbers are different because O A. You need to have far less accumulated than what you will withdraw because you only withdraw a portion of the investment every year the balance remains invested where it continues to earn interest O B. You need to have the same amount accumulated as you will withdraw because you will not eam further interest on your investment when you reach retirement O C. You need to have for more accumulated than what you will withdraw because you will withdraw a large portion of the investment every year the balance remains invested where continues to earn 8% interest OD. None of the above

Answer 1

Anount required on retirement is equal to present value of withdrawals

=220,000*PVAF(8%, 40 years)

=220,000*11.925

=$2,623,500

2.withdrawing = 220,000*40 =$8,800,000

Invested only 2,623,500

3.A.far less as the balance will earn interest