Question

You plan to retire in year 21 Your retirement will last 25 years starting in year 21 You want to have $50,000 each year of your retirement. How much would you have to invest each year, starting in one year, for 15 years , to exactly pay for your retirement ,if your investments earn 6.00% APR (compounded annually)? Calculate your answer to the nearest dollar. Write only the number with no dollar sign or comma (e.g., 3711)

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

) C D 1 Annual withdrawal during retirement No. of withdrawal APR Value of withdrawal at end year 21 end year 21 $50,000 25 6.00% $677,518 Value of retirement account at end of 15 year $477,623 No. of Annual deposit starting in one year 15 Annual deposit for 15 years $20,520

Cell reference -

B Annual withdrawal during retirement No. of withdrawal APR Value of withdrawal at end year 21 50000 25 0.06 =PV(C4,C3,-C2,,1) Value of retirement account at end of 15 year =C5/(1+C4)^6 No. of Annual deposit starting in one year 15 Annual deposit for 15 years =PMT(C4,C9,,-C7,0) 12 13 14

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.