Question
Hi! I actually have a problem with one of the test in the on line course: Introduction to Corporate Finance by Micheal R. Roberts. (University
Hi!
I actually have a problem with one of the test in the on line course: Introduction to Corporate Finance by Micheal R. Roberts. (University of Pennsylvania)
You are currently 27 years old and plan to retire at age 67. based on current life tables and family history, you anticipate living another 23 years after retirement. you estimate that you will need to 157212 in after-tax income per year in retirement during which time all withdrawals of your retirement saving will be taxed at 25%. Assume that you can make 5% per annum at your investments and these investments gains are not taxed.
a) How much pre-tax income do you need in retirement each year in order to meet your retirement needs ?
b) How much money do you need at the star of your retirement to meet the pre-tax income demands during retirement? Assume that you will live on your last year of income in the first year of retirement and then draw down your nest egg at the star of the second year. (equivalently, the end of the first year.)
c) How much money do you need Today to meet your pre-tax income demands during retirement if you will live on your last year of income in the first year of retirement and then draw down your nest egg at the start of the second year.
Thanks in advance!
Regards.
Rodrigo S.
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