Question
Please show work and solve using a BA II Plus Financial Calculator. Answer to #1 is here. Require help understand how to resolve #2 and
Please show work and solve using a BA II Plus Financial Calculator. Answer to #1 is here. Require help understand how to resolve #2 and #3.
An individual is currently 30 years old and she is planning her financial needs upon retirement. She will retire at age 65 (exactly 35 years from now) and she plans on funding 20 years of retirement with her investments. Ignore any social security payments and ignore any taxes.
She made $94,000 last year and she estimates she will need 75% of her current income in today's dollars to live on when she retires. She believes that inflation will average 2 percent per year during her working years. (For simplicity we will ignore inflation during her retirement years). She will retire at age 65 and will begin drawing down her retirement annuity at age 65. She plans on making a total of 20 annual withdrawals after she retires.
After she retires she believes she will be able to earn 5 percent per year. If she puts her money in a blended stock and bond portfolio now, she figures she can earn 9 percent per year until she retires.
This question is elsewhere on Chegg, but those solutions do not work for part 2 & 3. Also, someone posted a table with numbers in as a reply. That table had no explanation, so we couldn't figure it out.
1) How much money will she need to withdraw each year starting at age 65 to have the same purchasing power as today? Round your answer to the nearest penny, do not enter the dollar sign in your answer.
Solution: .75 * 94K = 70500 1.0235 = 1.9999 She will need to wthdrawl 140992.21 each year at age 65 to have the same purchasing power as today. Calculator: N=35, PV = 94000*.75 = 70500 I/Y = 2% P/Y = 1 CPT FV = 140992.21
2) How much money must she have at age 65 in order to make her planned withdrawals? Round your answer to the nearest penny and do not enter the dollar sign in your answer.
You would think this is just 20 years so 140992.21 * 20... but that answer does not work.
3) How much should she save per year starting right now in order to have the retirement annuity she desires? Round your answer to the nearest dollar and do not enter the dollar sign in your answer.
Thank You.
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