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Income Needed During Retirement $90,000 Number of Years in Retirement 30 Number of Year Before Retirement...

Income Needed During Retirement $90,000 Number of Years in Retirement 30 Number of Year Before Retirement 20 Rate of Return During Retirement 4.50% Rate of Return Before Retirement 7.50% Inflation Before and During Retirement 3% A. How much should your client save per year in order to meet their required funds for retirement? Calculate for both an annuity and annuity due.

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Expert Solution

CALCULATION FOR ANNUITY:
PAYMENT AT END   OF YEAR
Inflation Rate =3%
Return rate during retirement =4.5%
Rate Inflation adjusted return during retirement 1.46% (1.045/1.03)-1 1.014563
Nper Number of years in retirement 30
Pmt Annual retirement income $90,000
PV Amount required at the time of retirement $2,174,871 (Using Excel PV function with Rate =1.46%,Nper=30,Pmt=-90000)
Rate Return rate before retirement 7.50%
Nper Number of years of savings 20
FV Amount required at retirement $2,174,871
PMT Annual Saving required before retirement $50,222.54 (Using Excel PMT function with Rate =7.5%,Nper=20,FV=-2174871)
CALCULATION FOR ANNUITY DUE
PAYMENT AT BEGINNING OF YEAR
Inflation Rate =3%
Return rate during retirement =4.5%
Rate Inflation adjusted return during retirement 1.46% (1.045/1.03)-1 1.014563
Nper Number of years in retirement 30
Pmt Annual retirement income $90,000
Type Beginning of year payments                           1
PV Amount required at the time of retirement $2,206,544 (Using Excel PV function with Rate =1.46%,Nper=30,Pmt=-90000, Type=1)
Rate Return rate before retirement 7.50%
Nper Number of years of savings 20
FV Amount required at retirement $2,206,544
PMT Annual Saving required before retirement $50,953.94 (Using Excel PMT function with Rate =7.5%,Nper=20,FV=-2206544)

jeff jeffy answered 3 years ago
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