Ms. Smith plans to retire in 25 years (she will be 65). The IRS longevity table forecasts that Ms. Smith will live to be 85 years old. Ms. Smith is expected to have 20 years in retirement. Ms. Smith needs to be able to withdraw $60,000 annually (end of each year) from her retirement investment account before the balance is fully used. This plus her $35,000 annually in social security benefits will serve her needs (she believes). During her 20 years in retirement Ms. Smith expects the average annual compounded rate of return on her invested monies to be 5%. For the 25 years getting to retirement Ms. Smith expects her retirement investment account to earn an average annual compounded rate of return of 7%.

How much must Ms. Smith invest each year for the 25 years leading up to the retirement date so that the account accumulates the needed amount by the time that retirement begins?