Bert and Bertha estimate when they retire in 18 years that theirretirement portfolio will need...

Bert and Bertha estimate when they retire in 18 years that their retirement portfolio will need to have a value of $2,000,000 to finance their desired retirement lifestyle. They believe inflation will average 2% over time and their retirement investment return will average 8% until they retire. After they retire, they will invest more conservatively and the portfolio will average a 5% return during a 25 year retirement. If they currently have nothing saved for retirement, how much will they need to save at the end of each year to meet their retirement goal?

$53,400.
B. $65,440.
C. $71,090.
D. $49,450.
E. $46,730.

Expert Solution

You Want to accumulate $2,000,000 at retirement in 18 years.

Calculating the amount needs to be saved at the end of each year using Future Value of growing annuity formula:-

Where, C= Periodic Payments

r = Periodic Interest rate = 8%

g = Inflation rate = 2%

n= no of periods = 18

C = $46733.10

So, the need to save at the end of each year to meet their retirement goal is $46,730 (Difference due to rounding off of decimal)

Option E

jeff jeffy answered 2 years ago

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