A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals. Years until retirement: 30 Amount to withdraw each year: $120,000 Years to withdraw in retirement: 25 Interest rate: 7.5% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. Assume that the inflation rate is 3%. Consequently, when your friend retires she will want to withdraw $120,000 each year in today’s dollars. How much does she need to have in retirement at the end of year 30 in order to receive her retirement payments assuming that these retirement payments continue to increase at 3% per year throughout her retirement?
A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals. Years until retirement: 30 Amount to withdraw each year: $120,000 Years to withdraw in retirement: 25 Interest rate: 7.5% Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund. Assume that the inflation rate is 3%. Consequently, when your friend retires she will want to withdraw $120,000 each year in today’s dollars. How much does she need to have in retirement at the end of year 30 in order to receive her retirement payments assuming that these retirement payments continue to increase at 3% per year throughout her retirement?
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 43P
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Question
-
A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals.
Years until retirement:
30
Amount to withdraw each year:
$120,000
Years to withdraw in retirement:
25
Interest rate:
7.5%
Because your friend is planning ahead, the first withdrawal will not take place until one year after she retires. She wants to make equal annual deposits into her account for her retirement fund.
Assume that the inflation rate is 3%. Consequently, when your friend retires she will want to withdraw $120,000 each year in today’s dollars.
- How much does she need to have in retirement at the end of year 30 in order to receive her retirement payments assuming that these retirement payments continue to increase at 3% per year throughout her retirement?
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