Question
You plan to retire as soon as you turn 65. Upon retirement you want to receive $70,000 per year at the start of each year
You plan to retire as soon as you turn 65. Upon retirement you want to receive $70,000 per year at the start of each year (first payment on day you turn 65) for the next 20 years. You are 25 years old today. You want to start saving today.
1. How much do you have to save each year (annual periods) to ensure that you will have sufficient funds to receive $70,000 per year from the age of 65? Initially, while saving, you can earn a rate of return of 10% per year compounded annually. However, once you stop saving and start spending (age 65) you can only earn a rate of return of 5% per year compounded annually on whatever savings you have accumulated.
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