Question
You are in charge of assessing your retirement. You plan to save for your retirement by putting money into your retirement account every year for
You are in charge of assessing your retirement. You plan to save for your retirement by putting money into your retirement account every year for the next 25 years (you make a total of 25 annual contributions from t=1 to t=25). You assume this account will earn a return of 10%/yr while you are saving and while you are in retirement. You will make your first contribution one year from today (i.e. in 1 year, t=1, you will deposit your first contribution into the retirement account), and you plan to increase the amount of each contribution by 5%/year (t=2 contribution will be 5% larger than the t=1 contribution, etc.). You plan to retire and make your first withdrawal of $150,000 at t=26 (26 years from today). You plan to make withdrawals every year, and you will increase the size of the withdrawal each year by the inflation rate of 2%/yr (i.e. your withdrawals will increase by 2% each year). If you plan to need a total of 30 withdrawals, how much do you estimate your first contribution (at t=1) needs to be? Round your answer to the nearest dollar (e.g., 50265)
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