Question
Finn is saving up for his retirement. Today is his 36th birthday. Finn first started saving when he was 26 years old. On his 26th
Finn is saving up for his retirement. Today is his 36th birthday. Finn first started saving when he was 26 years old. On his 26th birthday, Finn made the first contribution to his retirement account when he deposited $2,500. Each year on his birthday, Finn has contributed another $2,500 to the account. The 11th (and last) of these contributions was made earlier today on his 36th birthday. The account has paid an effective annual rate of return of 7.5%. a) How much will Finn have in the account on his 36th birthday (after the contribution mentioned above)? Finn wants to close the account tomorrow (ignore the one day of interest) and move the money to a stock fund which is expected to earn an effective annual return of 8.3% a year. Finns plan is to continue making contributions to this account each year on his birthday. His next contribution will be one year from today (age 37) and his final planned contribution will be on his 66th birthday (30 additional contributions in all). Finn plans on being able to withdraw $10,000 a month for 15 years after he retires (180 withdrawals starting one month after his 66th birthday). b) How much does Finn need in his account on his 66th birthday to fund the future withdrawals? c) How much does each of the 30 annual contributions (from age 37 to 66) need to be to reach this goal?
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