Question
It is December 31, 2010, and 35 year old Camille Henley is reviewing her retirement savings and planning her retirement at age 60. She currently
It is December 31, 2010, and 35 year old Camille Henley is reviewing her retirement savings and planning her retirement at age 60. She currently has $55,000 saved (which includes the deposit she just made today) and invests $2,000 per year *at the end of the year) in a retirement account that earns about 10% annually. She has decided that she is comfortable living on $40,000 per year (in todays dollars) and believes she can continue to live on that amount as long as it is adjusted annually for inflation. Inflation is expected to average 2.86% per year for the foreseeable future. After researching information on average life expectancy for females of her background, her plan will assume she lives to age 88. She will withdraw the amount needed for each year during retirement at the beginning of the year. So, on December 31 at age 60, she will make her last deposit of $2,000 and the following day (January1) she will withdraw her first installment for retirement.
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