Question
You are planning to save for your retirement in 35 years and the college tuition for your two children. Your current monthly salary is $9,000
You are planning to save for your retirement in 35 years and the college tuition for your two children. Your current monthly salary is $9,000 per month and you expect your salary to keep pace with inflation. You expect inflation to be a 3.5 percent EAR for the rest of your life. You plan to deposit 12 percent of your salary each month into a retirement account. Additionally, your employer will deposit 4 percent of your salary into the account. You expect to earn a 10.8 nominal nominal EAR in your retirement savings account until retirement. Your children will begin college 15 years and 17 years from now. The university that you plan for your children to attend has started a new legacy program where for a minimal donation today, the school will guarantee that the tuition for your first child will be $130,000 and the tuition for your second child will be $135,000. Each of these tuition payments will be made when your child starts college and will cover the entire four years of tuition. If you can earn an 8.7 percent EAR after you retire, how much can you withdraw each month in real terms for the 25 years of your retirement?
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