Considering the long-term inflation rate amounts

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Reference no: EM131297825

By the end of each year, you contribute an equal amount of $3,000 to your retirement fund portfolio, which on average earns an annual return of 12.5% in the financial market. Such annual contributions continue until your retirement.

Considering the long-term inflation rate amounts to 3.5% annually, how much money at real purchasing power will you actually have when you retire? How much should you withdraw and spend per year at real purchasing power for your post-retirement life? (Hint: Your stated “annual return of 12.5%” is just nominal in this case; just as your boss gives you an annual salary raise of 3%, but how much real-purchasing-power “raise” you are getting per year actually, considering the annual inflation factor?)

Reference no: EM131297825

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