Question
Mr. Homer's friend Marge has asked for help with her retirement planning. Marge, who turned 27 years old today, has $5,000 already set aside in
Mr. Homer's friend Marge has asked for help with her retirement planning. Marge, who turned 27 years old today, has $5,000 already set aside in her retirement account and plans to add an equal amount in real terms at the end of each of the next 38 years so that she can retire at age 65. Her goal is to build a retirement account that will enable her to make 29 annual withdraws with a purchasing power of $50,000 (at today's prices) on her 66th through 94th birthdays.Her retirement account is expected to earn 6.00% per year and the expected inflation rate is 2.50% per year.How much does Marge need to set aside in real terms at the end of each of the next 38 years to meet her retirement goal?
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