Withdraw equal amount of money every year in retirement

Assignment Help Financial Management

Reference no: EM131948536

You are planning to retire after working for another 30 years. You believe that you can save 4% of your salary annually. Your last salary, which has just been paid, was $45,000. You anticipate that your salary will increase at the rate of 5% for the remainder of your working life. The savings will be placed in investments earning an average return of 9% per year. After retiring you expect to live on your savings for 20 years.

a. If you plan to withdraw an equal amount of money every year in retirement, how much will you be able to withdraw from your account every year?

b. Suppose that, to keep up with the rate of inflation, you want your retirement withdrawals to increase by 3% every year, how much will you withdraw in your last year of retirement?

c. Suppose that you want to withdraw an equal amount every year but you want to withdraw 5% more than your answer to (a.)

d. You plan to finance this increase by increasing your savings by $Y a year for the last 4 years of your working life. What is $Y?

(Manually Calculate)

Reference no: EM131948536

Questions Cloud

What should it charge for perpetual subscription : What should it charge for a perpetual subscription if the newspaper expects to raise its price by 4% annually (assume daily inflation is 1/365 the annual rate)?

What are your monthly mortgage payments : What are your monthly mortgage payments? What will be the amount of your final payment?

Cash inflows of proposed project : The number of time periods it will take before the cash inflows of a proposed project equal the amount of the initial project investment is known as.

Find the net present value of the project : If the required rate of return is 0.12, find the Net Present Value (NPV) of the project.

Withdraw equal amount of money every year in retirement : If you plan to withdraw an equal amount of money every year in retirement, how much will you be able to withdraw from your account every year?

What is present value of these trust payments : What is the present value of these trust payments if your opportunity cost is 10% annually?

Explain how balance sheet and income statement : Explain how a balance sheet and an income statement are constructed. What does the balance sheet tell you about how an organization functions?

Firm capital is supplied by its creditors and owners : A firm’s capital is supplied by its creditors and owners. An example of a perpetuity is the dividends typically paid on a preferred stock issue.

Lower-priority claim to assets and earnings than bondholders : Preferred stock has an infinite maturity and lower-priority claim to assets and earnings than bondholders.

User Account

All Pages