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You are now 25 years old. You would like to retire when you are 65 years old.

You are now 25 years old. You would like to retire when you are 65 years old. You want to receive starting at 65 an annual income of $150,000 per year until you are 95. How much money must you have in your retirement account when you are 65? Assume you can earn 4% per annum.

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Expert Solution

P = Annual income = $150,000

n = 95-65 = 30 years

r = annual interest rate = 4%

Present Value of Annual income at 65 = P * [1 - (1+r)^-n] / r

= $150,000 * [1 - (1+4%)^-30] / 4%

= $150,000 * 0.691681332 / 0.04

= $2,593,804.9951

Therefore, value of money must have in your account at 65 is $2,593,805

jeff jeffy answered 2 years ago
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