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Suppose that you would like to spend $50,000/year during retirement and you think that you will live for 20 years. If you can earn 4%
Suppose that you would like to spend $50,000/year during retirement and you think that you will live for 20 years. If you can earn 4% on your investments, how much do you need to have in your retirement account when you are ready to retire?
The timeline for this question looks like this:
______$50k__$50k___$50k .... __$50k__ 0 1 2 3 .... 20
You are solving for how much you need at time 0 (the year your retirement starts). Hence, this is a present value annuity problem.
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