Question

In: Finance

You plan to retire in 22 years. You would like to maintain your current level of...

You plan to retire in 22 years. You would like to maintain your current level of consumption which is $57,156 per year. You will need to have 33 years of consumption during your retirement. You can earn 4.79% per year (nominal terms) on your investments. In addition, you expect inflation to be 2.82% inflation per year, from now and through your retirement. How much do you have to invest each year, starting next year, for 8 years, in nominal terms to just cover your retirement needs?

Solutions

Expert Solution

Given nominal rate = 4.79%

Inflation = 2.82%

so real interest rate = (1+ nominal)/(1+ real ) -1 = (1.0479)/(1.0282) -1 = 1.9159%

required contribution per year is 124393


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