In: Finance

Tommy plans to retire in 25 years (1st withdrawal in year 26).
He is told by Simon that a desirable standard of living in 26 years
will require $180,249 per year. Tommy wants to be able to maintain
that level of purchasing power forever (Assume *inflation = 3%
per year*). Tommy plans to *increase his savings by 2% per
year* and expects to earn 6% per year on his investments.

How much does Tommy have to **save the first year**
to fund his retirement goal?

**Step 1 : Calculate Retirement Corpus**

To calculate the corpus reqired at the time of retirement, we need to use the PV function of excel:

- Retirement Period =
**20 Years**(Lets assume he'll live 20 years after retirement, ie, from 60 years to 80 years) - Effective rate of return =
**2.91%**

Retirement Corpur Required = **$2,782,790**

**Step 2 : Calculation of First Year
Investment**

- Saving period =
**25 years** - Goal Required =
**$2,782,790** - Rate of Return = (1+6%)*(1+2%)-1 =
**8.12%**

This can be solved using the PMT function excel:

Hence, the first year investment needs to be
**$34,594,** which will increased by 2% every year to
reach the goal.

Leonard Hofstadter would like to retire in 30 years (1st
withdrawal in year 31). He is told by Raj Koothrappali that he will
need about $230,000 per year (in t= 31 dollars) to fund his
retirement. Leonard wants to be able to maintain that level of
purchasing power for 25 years (Assume inflation = 2% per year).
Leonard plans to increase his savings by 5% per year and expects to
earn 8% per year on his investments.
What is Leonard’s...

A man plans to retire in 25 years and spend 35 years in
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years. He currently has $282,000 in his RRSP account and $10,000 in
a non-registered account. He will earn 5.50% before retirement and
during retirement he will readjust his portfolio to be more
conservative earning 3.50%. Inflation is 2%...

Newman plans to retire in 25 years and
plans to withdraw end of the year payments in the amount of $85,000
from
his
retirement account to allow him to enjoy the same standard of
living he has enjoyed in life thus far. Newman’s
financial planner has advised him that he should estimate his
retirement will last 30 years and use a conservative
8%
annual rate of return in his financial planning. Newman does
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Florian plans to retire in 25 years and spend 35 years in
retirement. He currently earns $82,500 before-tax annually, which
increases annually with the level of inflation. He has determined
that he needs 70% of his pre-retirement income for his retirement
years. He currently has $282,000 in his RRSP account and $10,000 in
a non-registered account. He will earn 5.50% before retirement and
during retirement he will readjust his portfolio to be more
conservative earning 3.50%. Inflation is 2% and...

1. Florian plans to retire in 25 years and spend 35 years in
retirement. He currently earns $82,500 before-tax annually, which
increases annually with the level of inflation. He has determined
that he needs 70% of his pre-retirement income for his retirement
years. He currently has $282,000 in his RRSP account and $10,000 in
a non-registered account. He will earn 5.50% before retirement and
during retirement he will readjust his portfolio to be more
conservative earning 3.50%. Inflation is 2%...

STATE: Andrew plans to retire in 40 years. He plans to invest
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.
PLAN: The distribution of annual returns on common stocks is
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Janice plans to retire in 25 years and would like to receive
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Ms. Smith plans to retire in 25 years (she will be 65). The IRS
longevity table forecasts that Ms. Smith will live to be 85 years
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An individual wants to retire in 25 years. At that time (s)he
wants to be able to withdraw $2500 per month to cover living
expenses. This individual has an expectation that (s)he
will live 25 years after the date of retirement.
The interest rate is 6% per year.
This individual has assumed that:
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A man is planning to retire in 25 years. He wishes to deposit a
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