Question
Your cousin Joe at age 25 wants to plan for his retirement and estimates to retire at the age of 65. He already has $5000
Your cousin Joe at age 25 wants to plan for his retirement and estimates to retire at the age of 65. He already has $5000 in his savings that he received as a gift from his mother. He plans to save some of his income each year during his working years and he plans to increase his savings at a constant 5% each year.
He wants to be able to spend $100.000 for 20 years after his retirement and at the end he wants $300.000 savings to donate his favorite charity. Retirement spending must increase and cover 2% annual inflation as well.
He expects to make 5% return on his savings during working years and 4% after retirement. Assume cash flows occur at the end of the year.
Calculate the saving amount in the first year of working for Joe.
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