Question
In: Economics
How much must you deposit each year into your retirement account starting now and continuing through...
How much must you deposit each year into your retirement account starting now and continuing through year 15 if you want to be able to withdraw $80,000 per year forever, beginning 27 years from now? Assume the account earns interest at 8% per year.
The amount to be deposited is determined to be $________?
Solutions
Expert Solution
Solution:-
Present worth of withdrawal = ($80,000 / 0.08) * (P/F, 8%, 26)
= ($80,000 / 0.08) * (0.1325)
= $1,000,000 * 0.1325
= $132,500
Let annual deposit be A, then as per given condition
A + A * (P/A, 8%, 15) = $132,500
A + A * (8.5595) = $132,500
A = $132,500 / 9.5595 = $13,860.5
Rahul Sunny answered 2 years agoRelated Solutions
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