How much is needed in the retirement account

Reference no: EM132177336

Question - CASE: It is June 03, 2018 and Tatenda will turn 30 years old on the last day of this year. She is in the process of reviewing her retirement savings and planning for her retirement at the age of 63. She currently has R350 000 saved. She decided to deposit Rx.xx per month in a retirement account that earns about 8.75% p.a. compounded monthly. She has decided that she is comfortable living on R15 000 per month (in today's money) and she thinks that she can continue to live on that amount, as long as it is adjusted annually (from January 01) for inflation. Inflation is expected to stay fixed at an average of 3% per year. After researching information on average life expectancy for background, her plan will assume that she will live to the age of 90 years. She will withdraw monthly the amount needed for each month during her retirement years as from the end of the 1^st month. So, on December 31 at the age of 63, she will make her last deposit of Rxxx. At the end of January, she will withdraw her first installment for retirement.

1. How much will Tatenda withdraw every month in her 1^st year of retirement?

2. How much is needed in the retirement account at the start of retirement for Tatenda to accomplish her goal?

3. How much must Tatenda save every month from her 35^th birthday to her 63^rd birthday to meet her goal?

4. If Tatenda should die days after her 80^th birthday, and she should leave the rest of her money as perpetuity to her alma mater, Karatara Primary School, then how much can that school expect from her trust every year, starting when Tatenda would have been 81 years of age.

Reference no: EM132177336

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