Suppose you are 40 years old and plan to retire in exactly 20 years. Twenty-one years from now you will need to withdraw RM5,000 EVERY SIX MONTHS from a retirement fund to supplement your social daily life expenses.

Suppose you are 40 years old and plan to retire in exactly 20 years. Twenty-one years from now you will need to withdraw RM5,000 EVERY SIX MONTHS from a retirement fund to supplement your social daily life expenses. You expect to live to the age of 85. How much money should you place in the retirement fund every six months for the next 20 years to reach your retirement goal if you can earn 12 percent interest per year from the fund?

Solutions

Expert Solution

Here,

Amount to be withdrawn semi-annually = RM5,000

Time Period = 25 years

Interest rate = 12%

First of all, find out the present value of this withdrawn amount

Using the PV Function of Excel

Calculations are made as follows:

Now, this amount at retirement becomes the future value,

Using the PMT Function of Excel

Calculations are made as follows:

The Amount to be placed into retirement every six months is RM509.23.

Nabeel answered 1 year ago

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