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John is saving for retirement by contributing $20,000 a year to his 401(k) assuming that John...

John is saving for retirement by contributing $20,000 a year to his 401(k) assuming that John is currently 40 and is looking to retire at the age of 60 (Assume 7% returns). John wants to live of his investment earnings going forward Compute how much income he can expect a month with the investment income of 5% Annually.

Expert Solution

Currently John is 40 and contributes 20,000 a year till the age of 60. Total retirement amount schedule is as below:

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Future Value Calculator

The future value calculator can be used to calculate the future value (FV) of an investment with given inputs of compounding periods (N), interest/yield rate (I/Y), starting amount, and periodic deposit/annuity payment per period (PMT).

Number of Periods (N)
Starting Amount
Interest Rate (I/Y)
Periodic Deposit (PMT)		/period
PMT made at the beginning end of each compound period

Results

Future Value: $877,303.54

PV (Present Value)	$226,711.90
N (Number of Periods)	20.000
I/Y (Interest Rate)	7.000
PMT (Periodic Deposit)	$20,000.00
Starting Amount	$0.00
Total Periodic Deposits	$400,000.00
Total Interest	$477,303.54

Balance Accumulation Graph

PrincipalInterestBalance05101520$0$250.0K$500.0K$750.0K$1.0M

Breakdown

46%54%Periodic DepositsInterest

Schedule

	start principal	start balance	interest	end balance
1	$20,000.00	$20,000.00	$1,400.00	$21,400.00
2	$40,000.00	$41,400.00	$2,898.00	$44,298.00
3	$60,000.00	$64,298.00	$4,500.86	$68,798.86
4	$80,000.00	$88,798.86	$6,215.92	$95,014.78
5	$100,000.00	$115,014.78	$8,051.03	$123,065.81
6	$120,000.00	$143,065.81	$10,014.61	$153,080.42
7	$140,000.00	$173,080.42	$12,115.63	$185,196.05
8	$160,000.00	$205,196.05	$14,363.72	$219,559.77
9	$180,000.00	$239,559.77	$16,769.18	$256,328.96
10	$200,000.00	$276,328.96	$19,343.03	$295,671.99
11	$220,000.00	$315,671.99	$22,097.04	$337,769.03
12	$240,000.00	$357,769.03	$25,043.83	$382,812.86
13	$260,000.00	$402,812.86	$28,196.90	$431,009.76
14	$280,000.00	$451,009.76	$31,570.68	$482,580.44
15	$300,000.00	$502,580.44	$35,180.63	$537,761.07
16	$320,000.00	$557,761.07	$39,043.27	$596,804.35
17	$340,000.00	$616,804.35	$43,176.30	$659,980.65
18	$360,000.00	$679,980.65	$47,598.65	$727,579.30
19	$380,000.00	$747,579.30	$52,330.55	$799,909.85
20	$400,000.00	$819,909.85	$57,393.69	$877,303.54

Total investment at the age of 60 is $877,303.54.

5% of investment income earned annually.Yearly investment income=$877,303.54*0.05=$43,865.18

Monthly income =($43,865.18)/12= $3655

jeff jeffy answered 2 years ago

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