Question
By the end of each year, you contribute an equal amount of $3,000 to your retirement fund portfolio, which on average earns an annual return
By the end of each year, you contribute an equal amount of $3,000 to your retirement fund portfolio, which on average earns an annual return of 12.5%. The contribution continues until your retirement. You retire in 30 years and take equal draws for 20 years.
Using Microsoft Excel Finance Formulas Considering the long-term inflation rate amounts to 3.5% annually, how much money at real purchasing power will you actually have when you retire? How much should you withdraw and spend per year at real purchasing power for your post-retirement life? (Hints: Your annual return of 12.5% is just nominal as stated in this case, but the annual real return will be less than the given nominal return with the annual inflation being adjusted for. For example, your boss gives you an annual salary raise of 3%, but how much real-purchasing-power raise you are getting per year actually, if there is an annual inflation eating up your money growth?)
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