Question
You are making plans for your retirement. You have just turned 30 and want to retire on your 65 th birthday. Once retired, you plan
You are making plans for your retirement. You have just turned 30 and want to retire on your 65thbirthday. Once retired, you plan to move to a tax-free Caribbean state, where you believe you can live comfortably on $10,000 per month. Your first payment of $10,000 will occur when you retire at age 65, and you will receive your last instalment from your retirement fund one month before your 85thbirthday. On your 85thbirthday, you intend to move back to Canada and freeload off your kids until you die.
Your current salary is $60,000 per year, or $5,000 per month. Your personal tax rate is approximately 25%. You estimate that you can earn an average return of 10% APR compounded annually on any money you invest over the next 60 years. You will make your first deposit one month from now and your last deposit on your 65thbirthday. To ensure that you are able to achieve your retirement objective, what percentage of your after-tax monthly income must you save?
I have figured this out :
Amount needed 2390000
After Tax Income45000
Per Month 3750
PV 0
FV 2390000
Interest 10%
I am confused about the 10% investment for the next 60 years and the compounding interest.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started