Question
Please explain in EXCEL: When you retire, you would like to withdraw $13,000 per month in real terms for 15 years while you travel around
Please explain in EXCEL:
When you retire, you would like to withdraw $13,000 per month in real terms for 15 years while you travel around the world and enjoy yourself. After that period, you will slow down and only need $8,000 per month in real terms for the next 15 years. After the combined 30 years of withdrawals, you will no longer need any cash, although you would like to leave your grandchildren an inheritance of $1.5 million in real terms. Your nominal EAR after retirement will be 7 percent. You have 35 years to fund your retirement account and you feel that you will earn an EAR of 11 percent until you retire. You expect to receive payment from a trust fund 10 years from today that you will add to your retirement account when it is received. The current value of the trust is $30,000 and you expect that it will increase at the rate of inflation until you receive the distribution, at which point you will invest it. You expect the inflation rate to be a 3.6 percent EAR over your lifetime. How much do you have to save each month in real terms to fund your retirement? How much will your inheritance for your grandchildren be in nominal terms?
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