You have just had your 30th birthday. You have two children, one of which will go to college 10 years from now and require four beginning-of-the-year payments for college expenses of $10,000, $11,000, $12,000, and $13,000. Your second child will go to college 15 years from now and require four beginning-of-the-year payments for college expenses of $15,000, $16,000, $17,000, and $18,000. In addition, you plan to retire in 30 years. You want to be able to withdraw $50,000 per year (at the end of each year) from an account throughout your retirement. You expect to live 20 years beyond retirement. The first withdrawal will occur on your 61st birthday.

What equal, annual, and end-of-the-year amount must you save for each of the next 30 years to meet these goals, if all savings earn a 13% annual rate of return?

Tip: There are many ways to complete this problem as well through TVM. One way is to find how much you would need to fund today (PVA target) to fund child 1s education, child 2s education, and your retirement. To find the retirement amount you will have to determine the PVA at retirement, and then discount that amount to today. Sum the three amounts today, and that is the PVA total amount. If you do not have the funds today to pay for all goals, borrow the funds and then make payments over the 30 years.

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