Question
For Investors John and Jenny: Construct the cash flow diagram. Assume the investor can earn 8% (compounded annually) on his or her investments, with inflation
For Investors John and Jenny:
Construct the cash flow diagram. Assume the investor can earn 8% (compounded annually) on his or her investments, with inflation rate of 3%.
John graduates from UWP at age 22 and is unable to find a job in the down economy. Five years later, he is finally employed, but it takes another 15 years to pay back the loans he ran up after college. At age 42 (EOY42), John begins planning for retirement. For 5 years (EOY42-EOY46), he sets aside $2000 each year. Then he is laid off. At age 50 he secures an excellent job. He begins saving $5,000 at age 51 (EOY51). He increases this investment by $100 each of the following years. He retires at age 70 (EOY70). Calculate the uniform amount he can withdraw each year from age 71 to age 90 to finance his retirement.
Jenny graduates from UWP at age 22. That same year her rich great aunt passes away leaving her with a $90,000 inheritance. Jenny considers buying a new car and putting a down payment on a house. Instead she invests the money in a retirement account (EOY 22). The next year Jenny also starts investing in her companys retirement plan. She invests $1000 the year after she gains the inheritance (EOY23) and increases this amount by $200 each year for the next 15 years (EOY24-EOY38). At this point she decides to quit her job and join the Peace Corps. She doesnt save any more money for retirement. At age 71 (EOY) she begins withdrawing from her retirement account. Calculate the uniform amount she can withdraw each year from age 71 to age 90 to finance her retirement.
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