Reference no: EM13825789
Cash Flow Evaluation. You want to retire in 20 years from today and then start making withdrawals from your savings every year, with the first withdrawal coming one-year after retirement (or 21 years from today) for 25 total annual withdrawals (at 21 years through 45 years from now, annually). You want your annual withdrawals to be $75,000 per year. Additionally, you want to take a world tour in 25 years from now when you turn 70, with an additional cost of $35,000 that would occur exactly 25 years from today.
-You assume that you can earn a nominal APR rate of 4%, with monthly compounding, on your savings over the next 45 years.
a) How much money must you have in your retirement savings account at the beginning of your retirement (20 years from now) to fund this future retirement withdrawal stream, assuming that you make no new deposits after retirement.
b) Assume that you want to save up the sum calculated in a) above. If you make monthly deposits into your retirement account, with the first deposit made one-month from today and the last deposit made just as your retire (or 20 years from today for 240 total monthly deposits), then how much must you deposit monthly to fund this retirement? (such that your retirement account will have an approximate balance of zero after the last $60,000 withdrawal at time-45).
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