You have just graduated at age 22. You already have a job as an investment banker. You plan to work continuously until age 65 and retire exactly on that day. You expect to live until exactly 90. Assume your investments earn 8% per year. You plan to contribute $10,000 to your retirement fund every year on your birthday starting at age 23. Your last deposit will be at exactly age 65 and your first withdrawal will be at age 66. Your last withdrawal will be at the moment you die at age 90. Ignore all tax considerations.

1. How much will you be able to spend each year in retirement?

2. How much will you be able to spend each year in retirement if you begin deposits at age 30?

3. How much larger do your deposits have to be if deposits start at age 30 to equal your answer in part 1?

Now lets consider the effect of inflation.

4. Recalculate parts 1, 2, and 3 above.