Question

In: Finance

You plan to retire after 30 years. After that, you need $200,000 per year for 10...

You plan to retire after 30 years. After that, you need $200,000 per year for 10 years (first withdrawal at t=31). At the end of these 10 years, you will enter a reitrement home where you will stay for the rest of your life. As soon as you enter the retirement home, you will need to make a single payment of $1,000,000. You want to start saving for your retirement in an account that pays you 9% p.a. Therefore, beginning from the end of the first year (t=1), you will make equal yearly deposits into this account for 30 years. You expect to receive $500,000 at t=30 from a cash value insurance policy that you own. This money will be deposited in your retirement account. What should your yearly deposits into the account be?

Solutions

Expert Solution

STEP 1: amount required at age 30
Amount needed for 10 years withdrawal $1,283,531.54
PV of payment to be made at t 41 $422,410.81
Total amount required at Year 30 $1,705,942.35
STEP 2: Amount required in form of deposits
Insurance policy amount at year 30 500000
Balance amount to be raised by deposits $1,205,942.35
STEP 3: Deposit amount
Annual deposits required $8,847.22

WORKINGS


Related Solutions

You plan to withdraw $80,000 per year for 30 years after you retire at age 65....
You plan to withdraw $80,000 per year for 30 years after you retire at age 65. You are age 25 now and want to make one deposit at end of each year for 40 years then stop depositing after 40 deposits. To accumulate enough funds to afford the 30 withdrawals, you are presented with 2 options. First is an investment with 8% annual return and second one with 6% annual return. What is the difference between the annual deposit amount...
You plan to work for another 30 years at which point you plan to retire, after...
You plan to work for another 30 years at which point you plan to retire, after which you expect to live for another 30 years. During your retirement, you plan to make annual withdrawals at the beginning of each year where each withdrawal should have the same purchasing power as $100,000 today. You would also like to provide a bequest to your children (paid when you die) that has the same purchasing power as $1 million today. To provide for...
Neha would retire 30 years from today and she would need ₹ 6,00,000 per year after...
Neha would retire 30 years from today and she would need ₹ 6,00,000 per year after her retirement, with the first retirement funds withdrawn one year from the day she retires. Assume a return of 7% per annum on her retirement funds and if her planning is for 25 years after retirement, Calculate: a. How much lumpsum she should deposit in her account today so that she has enough funds for retirement? b. How much she should deposit each year...
I plan to retire in 40 years and live 30 years after retiring.•After retirement I...
I plan to retire in 40 years and live 30 years after retiring. •After retirement I want to be able to withdraw $30,000 each year. •The annual interest rate is 8%.•How much do I need to save each year in the next 40 years? How would you do this on a BAII Plus Calculator?
You plan to withdraw $80,000 per year for 30 years after youretire at age 65....
You plan to withdraw $80,000 per year for 30 years after you retire at age 65. You are age 25 now and want to make one deposit at end of each year for 40 years then stop depositing after 40 deposits. To accumulate enough funds to afford the 30 withdrawals, you are presented with 2 options. First is an investment with 8% annual return and second one with 6% annual return. What is the difference between the annual deposit amount...
You plan to retire 10 years from today. Your current utility bills are $3,457 per year....
You plan to retire 10 years from today. Your current utility bills are $3,457 per year. How much will your utility bills be when you retire if utility costs are rising at 4.91% per year?
You plan to save $1,200 per month for the next 35 years until you retire. After...
You plan to save $1,200 per month for the next 35 years until you retire. After you retire you want to withdraw $450,000 per year for 30 years. If you expect to earn 6% after retirement, what annual rate will you need to earn until you retire to meet your goal?
Assume that you plan to retire in 35 years and that you estimate you will need...
Assume that you plan to retire in 35 years and that you estimate you will need an income of $100,000 at the beginning of each year for 30 years, following your retirement. You also plan to donate $1,000,000 to the Georgia Southern University College of Business to endow a scholarship in the name of your favorite finance professor. You will make this endowment exactly 5 years after you retire. Assume that you will earn 11.00 percent during your working years...
You plan to retire in 40 years. After that, you want to receive an annuity of...
You plan to retire in 40 years. After that, you want to receive an annuity of 5000 per month for 25 years, beginning immediately upon retirement. If you can earn 6% per year, compounded monthly, how much must you invest at the end of each month before retirement?
You plan to retire in 30 years. Beginning in 31 years from now you wish to...
You plan to retire in 30 years. Beginning in 31 years from now you wish to have an annual retirement income of $80,000 / year as measured in today’s dollars. The inflation rate is assumed to be 2.5%. Each year in retirement you wish to have your retirement income grow by 3% per year. You plan on living for 35 years in retirement. Starting in one year from now you are going to make annual deposits into a savings account....
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT