Question
Suppose your current annual income is $120, 000 and you are planning on saving for living after retirement (in 40 years). You need $80, 000
Suppose your current annual income is $120, 000 and you are planning on saving for living after retirement (in 40 years). You need $80, 000 every year after your retirement to maintain your living standard. Your plan is to set aside a predetermined amount of your earnings (before your retirement) each month and the monthly contributions are growing at a rate 3% (annualized growth rate). Assume the annual risk-free rate is 8% and you will live forever.
How much money do you need at the time of retirement to maintain your living standard?
What is the present value of the amount above today?
What does your first monthly contribution C1 need to be?
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