Jeremy would like to retire in 25 years. He would like his retirement income to be...

Jeremy would like to retire in 25 years. He would like his retirement income to be $250,000, and this figure should grow at the same rate as inflation, expected to be 2 percent annually. He expects to live 30 years after he retires, and plans to leave $3 million to TYU after he dies.

Jeremy currently has $1,000,000 in his retirement fund. The fund is expected to earn 6 percent annually. Assuming that Jeremy increases his annual retirement savings by 2 percent per year (the inflation rate), how much must he save this year in order to have enough funds for his retirement goals?

HINTS: Both Jeremy’s retirement income AND his annual retirement savings are growing annuities (each at the 2 percent inflation rate). Also, you may assume that all payments are made or received at the end of each year, so that they are ordinary growing annuities.

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jeff jeffy answered 1 year ago

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