Charlotte is 22 years old, has just graduated from college, and is beginning her new job. She

already has plans for her eventual retirement and will start saving right away with annual IRA

contributions. Her investments will earn 7.25%. She intends to retire early at age 62 after which

she conservatively estimates that her nest egg will earn 5.50%. The actuarial tables for her

demographic indicate a life expectancy of 87 years. She anticipates some one-time expenses as

she transitions into retirement - downsizing, relocating to a warm climate, etc. - and will need

an initial withdrawal of $125,000. During the rest of her retirement, she estimates that she will

need $75,000 per year to maintain a comfortable lifestyle.

How much must she contribute every year from now until retirement? It will be easier if you

first calculate how much she will need to have accumulated when she begins her retirement.