Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are trying to decide how much to save for retirement. Assume you plan to save $ 5 5 0 0 per year with the

You are trying to decide how much to save for retirement. Assume you plan to save $5500 per year with the first investment made one year from now. You think you can earn 12% per year on your investments and you plan to retire in 35years, immediately after making your last $5500 investment.
a. How much will you have in your retirement account on the day you retire?
b. If, instead of investing $5500 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be?
c. If you hope to live for 15 years in retirement, how much can you withdraw every year in retirement(starting one year after retirement) so that you will just exhaust your savings with the 15th withdrawal(assume your savings will continue to earn 12% in retirement)?
d. If, instead, you decide to withdraw $300000 per year in retirement(again with the first withdrawal one year after retiring), how many years will it take until you exhaust your savings?
e. Assuming the most you can afford to save is $1100 per year, but you want to retire with $1000000.00 in your investment account, how high of a return do you need to earn on your investments?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered 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

Students also viewed these Finance questions