Determining the retirement account

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Assume you need $107,102 in the first year of retirement. Call it CF1. Note that you withdraw that money 35 years from today (t = 35 on a full retirement-plan timeline). Now assume you will keep your retirement savings ("nest egg") in an investment that generates a return of 4% per year, during each year of your retirement and in the year before it starts. You plan to be retired for 27 years. You will continue to need the same purchasing power (during each year of retirement) that $107,102 represents in the first year of retirement. Inflation will remain at 3% per year forever. How much money do you need to have in your retirement account, one year before your retirement starts (this helps with timing issues), to fund (or finance) this stream of withdrawals? [i.e. what is the nest egg size at t=34?]. Round to the nearest dollar.

Reference no: EM132658675

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