Question
2. You are 25 and plan to retire in 40 years at age 65. Answer the following questions. c. If you want that amount each
2. You are 25 and plan to retire in 40 years at age 65. Answer the following questions.
c. If you want that amount each year adjusted for inflation and you did not want to erode your principle, how much would you need as a lump sum when you retire? Assume a 8% return on money.
Income required at retirement (PMT) = 106,580
Inflation rate = 3.22%
Rate of return = 8%
Inflation adjusted rate of return(rate) = (1+8%)/(1+3.22%) -1 = 4.63%
Retirement Corpus = PV( 4.63%,20,106,580) = $1,370,900
e. How much would you need to save today as a lump sum to get the amount from part c in 40 years? (assume 8% return.)
f. How much would you need to save per month if you started saving at 35?
g. How much would you need to save per month if you started saving at 45?
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