Reference no: EM133002367

Dexter and Molly hope to retire 35 years from now (they are both 30), and they expect to live until age 90. Their hope is to be able to withdraw $125,000 a year from their retirement account - the first withdrawal will occur on their 65th birthdays, and the 25th and final withdrawal will occur on their 89th birthdays. They expect to leave their children a total inheritance of $500,000 to split amongst themselves. So, on their 90thbirthdays, the account is expected to have a $500,000 value (i.e., they expect to leave their children a total inheritance of $500,000).Dexter and Molly currently have $75,000 saved in a retirement account, which consists of a portfolio of mutual funds that is expected to produce an annual return of 7%. To accomplish their goals, they would like to deposit an equal annual amount into their account starting one year from today (on their 31stbirthdays) and continue to make those deposits through age 65. (Again, the account has an expected annual return of 7%.) Thus, they will make 35 annual end-of-year deposits to this account.

How much do Dexter and Molly need to deposit into the account at the end of each of the next 35 years to accomplish their goals?