Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are planning for a very early retirement. You would like to retire at age 40 and have enough money saved to be able to

You are planning for a very early retirement. You would like to retire at age 40 and have enough money saved to be able to draw $210,000 per year for the next 40

years (based on family history, you think you'll live to age 80).

You plan to save for retirement by making 20

equal annual installments (from age 20 to age 40) into a fairly risky investment fund that you expect will earn 10%

per year. You will leave the money in this fund until it is completely depleted when you are 80 years old.

LOADING...

(Click the icon to view the present value annuity table.)

LOADING...

(Click the icon to view the future value annuity table.)

LOADING...

(Click the icon to view the present value table.)

LOADING...

(Click the icon to view the future value table.)

To make your plan work answer the following questions:

LOADING...

(Click the icon to view the questions.)

1. How much money must you accumulate by retirement?

(Hint:

Find the present value of the

$210,000

withdrawals.)

Calculate the present value to find out how much money must be accumulated by retirement. (Round your answer to the nearest whole dollar.)

The present value is $

.

More Informatiom

How much money must you accumulate by retirement?

(Hint:

Find the present value of the

$210,000

withdrawals.)

2.

How does this amount compare to the total amount you will draw out of the investment during retirement? How can these numbers be so different?

3.

How much must you pay into the investment each year for the first

twentytwenty

years?

(Hint:

Your answer from Requirement 1 becomes the future value of this annuity.)

4.

How does the total out-of-pocket savings compare to the investment's value at the end of the

twentytwenty-year

savings period and the withdrawals you will make during retirement?

PrintDone

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Understanding And Auditing IT Systems Volume 1

Authors: Young-Woon Min

2nd Edition

978-1257124084

More Books

Students also viewed these Accounting questions