Suppose you plan to retire at age 70, and you want to be able towithdraw...

Suppose you plan to retire at age 70, and you want to be able to withdraw an amount of $6,000 per month beginning with the first month after your 70th birthday until you reach your birthday at age 100. If the account which contains your savings earns 7% APR compounded monthly, how much money needs to be in the account by the time you reach your 70th birthday? (Answer to the nearest dollar.)

Solutions

Expert Solution

The amount is computed as shown below:

Present value = Monthly payment x [ (1 – 1 / (1 + r)ⁿ) / r ]

r is computed as follows:

= 7% / 12 (Since the payments are on monthly basis, hence divided by 12)

= 0.58333333% or 0.0058333333

n is computed as follows:

= (100 - 70) i.e. 30 year x 12 months (Since the payments are on monthly basis, hence multiplied by 12)

= 360

So, the amount is computed as follows:

= $ 6,000 x [ (1 - 1 / (1 + 0.005833333)³⁶⁰ ) / 0.005833333 ]

= $ 6,000 x 150.307574

= $ 901,845

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

Suppose you plan to retire at age 70, and you want to be able to withdraw...

Suppose you plan to retire at age 70, and you want to be able to withdraw an amount of $80,000 per year on each birthday from age 70 to age 100 (a total of 31 withdrawals). If the account which contains your savings earns 6% per year simple interest, how much money needs to be in the account by the time you reach your 70th birthday? (Answer to the nearest dollar.) Hint: This can be solved as a 30-year ordinary...

You plan to retire at the age of 60. You are now 30 and plan to...

You plan to retire at the age of 60. You are now 30 and plan to save $8,000 per year for retirement, with the first deposit made one year from today. Your mutual fund account offers you 10% of return each year. You expect to live on your retirement fund till age 90 after retirement. Calculate total amount available for retirement at the age of 60. $1,365,510 $1,417,088 $1,315,952 $1,258,146

Suppose you are 30 years old. You plan to retire at age 67 and live forever...

Suppose you are 30 years old. You plan to retire at age 67 and live forever (Ok 100 years old). You want to be able to withdraw $100,000 per year during your retirement. Assume that you will earn a starting salary of $50,000, which will grow at a 2% annual rate. Your employer contributes 5% of your annual salary to your retirement fund. Further assume that your retirement fund will be invested in a basket of well diversified indices that...

Suppose you are just starting your retirement savings at age 25, and plan to retire at...

Suppose you are just starting your retirement savings at age 25, and plan to retire at age 70. Your goal is to save a million dollars in your IRA and you believe you can earn a 7% rate of return on your investment. How much must you contribute to your IRA each year to meet your goal? Select one: a. $22,222 b. $3,500 c. $619 d. $21,881

You are 30 years old and want to retire at the age of age 65 and...

You are 30 years old and want to retire at the age of age 65 and expect to live another 25 years. On the day you retire, you want to have $900,000 in your retirement savings account. a) If you invest monthly starting one month from today and your investment earns 6.0 percent per year, How much money do you need to invest every month until you retire? b) You're retired with $900,000 and you have 25 more years. You...

You begin saving for retirement at age 25, and you plan to retire at age 60....

You begin saving for retirement at age 25, and you plan to retire at age 60. You want to deposit a certain amount each month into an account that pays an APR of 3% compounded monthly. Make a table that shows the amount you must deposit each month in terms of the nest egg you desire to have when you retire. (Round your answers to the nearest cent.) Nest egg size Needed deposit $100,000 $ $200,000 $ $300,000 $ $400,000...

a) You are 21 and want to retire at the age of 60. Starting on your...

a) You are 21 and want to retire at the age of 60. Starting on your retirement date you’d like to have an annuity paying $25,000 per year for 25 years. Your uncle is giving you $10,000 when you graduate. How much would you need to save every year from next year to retirement to finish funding this annuity? Interest rates are 6%.

a. You are currently 25 and plan to retire at age 65. You think you will...

a. You are currently 25 and plan to retire at age 65. You think you will need $150,000 per year during your retirement years. You assume that you will live until age 90. You also want to leave $1,000,000 to Wingate University when you die at age 90. You expect to get a 6% rate on your investments. How much do you need to have in your account at retirement? If you start saving now at age 25, how much...

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 have a couple who are 31 years old, and want to retire at the age...

You have a couple who are 31 years old, and want to retire at the age of 67. Knowing that, the couple has a combined annual income of $95,000 today. 1. They are curious to find out if college costs $90,000 per year when their child gets into college in 19 years, how much is the total cost of a college education (that lasts for 4 years) in today’s dollars if the cost of money is 8%? Assume you pay...

Subjects