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How much would they need to deposit into the account

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Question - David and Janet recognize that the value of their $125,000 annual withdrawals during retirement will steadily decline because of expected inflation. Assume that they want to have the value of these withdrawals increase by 4% a year during retirement to account for expected inflation. In other words, they want to withdraw $125,000 at age 65, $130,000 at age 66, and $130,000 × 1.04 at age 67, etc. How much would they need to deposit into the account at the end of each of the next 25 years to meet this revised goal, which protects them against rising inflation? Assume they still plan to leave their children a total inheritance of $400,000.

Reference no: EM133134903

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