Stan is going to work for the next 30 years and then retire. Starting the day...

Stan is going to work for the next 30 years and then retire. Starting the day he retires, he would like to withdraw $90,000 per year (in monthly installments) from an investment account for a twenty-five year retirement. At the end of his retirement, he would like to leave a bequest of $100,000 to his heirs. He currently has $10,000 in his investment account for these purposes. Stan plans to save for retirement by making monthly deposits into the investment account, beginning two years from now and ending the month before he retires. The investment account pays 9 percent compounded monthly. Construct a flexible spreadsheet model to answer the following questions:

1. How much must Stan invest each month to accomplish his retirement goals?

2. If Stan's employer will contribute $0.50 for every $1.00 he invests, how much of the deposit in #1 will Stan have to contribute?

Inputs:
	Years to retirement
	Length of retirement (in years)
	Years until the first deposit
	Desired annual retirement income
	Desired bequest to his heirs
	Amount already invested
	Annual interest rate
	Compounding periods per year

Ouputs:
	At retirement:
	Value of retirement income:
	Value of bequest:
	Total needed at retirement
	Funds available at retirement
	Additional Funds needed

1.	Required monthly payment

2.	Stan's contribution
	Company contribution
	Total

Expert Solution


Inputs:
	Years to retirement	30
	Length of retirement (in years)	25
	Years until the first deposit	2
	Desired annual retirement income	$90,000
	Desired bequest to his heirs	$100,000
	Amount already invested	$10,000
	Annual interest rate	9%
	Compounding periods per year	12
Ouputs:
	At retirement:
	Value of retirement income:	$900,415	(Using PV Function of excel with Rate=(9/12)%,Nper=(25*12),Pmt=(90000/12),Type=1)
	Value of bequest:	$10,629	(Using PV Function of excel with Rate=(9/12)%,Nper=(25*12),Fv=100000)
	Total needed at retirement	$911,044	(900415+10629)
	Funds available at retirement	$147,306	(Using FV Function of excel with Rate=(9/12)%,Nper=(30*12),Pv=-10000)
	Additional Funds needed	$763,738	(911044-147306)

1	Required monthly payment	$502.59	(Using PMT Function of excel with Rate=(9/12)%,Nper=((30-2)*12),Fv=763738,Type=1)

2	Stan's contribution	$335.06	(2/3)*502.59)
	Company contribution	$167.53	(1/3)*502.59)
	Total	$502.59	(335.06+167.53)

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