How much will his investments be worth

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Your dad is now 55 years old and plans to retire at age 70. He currently has a stock portfolio worth $450,000. The portfolio is expected to earn a return of 8 percent per year.

a. If your dad does not save another penny, what will be the total value of his investments when he retires at age 70?

b. Assume he plans to invest an additional $12,000 every year in his portfolio for the next 15 years (starting one year from now). How much will his investments be worth when he retires at 70?

c. Assume that your dad expects to live 20 years after he retires (i.e., until age 90). Today, at age 55, he takes all of his investments and places them in an account that pays 5 percent per year (use the scenario from part b in which he continues saving and assume that the additional savings also earn a return of 5 percent per year). If he starts withdrawing funds starting on the day he turns 71, how much can he withdraw every year and leave nothing in the account after a 20th and final withdrawal on the day he turns 90?

Reference no: EM132554992

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