1. Find the retirement calculator at moneychimp website to answer the following questions. Suppose you have $4,000,000 when you retire and want to withdraw an equal amount each year for the next 35 years. a) How much can you withdraw each year if you earn 8% b) What if you can earn 12%? c) What if the market failed and your earnings dropped to -.7%. How long would it take to drain your account if you did nothing about this loss pattern? 2. Retirement planning can be a bit of a headache. A close friend has decided to begin saving for her retirement. Keep the following in mind: She has 25 years until retirement. She wants to be able to withdraw $95,000 each year. She figures she has roughly 35 years that she will withdraw during her retirement. The interest rate to consider is 8%. Due to planning ahead, your friend will not make the first withdrawal until a year after she retires. The goal is to make equal annual deposits into her retirement fund account. a) If she delays making deposits for one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals at retirement?
1. Find the retirement calculator at moneychimp website to answer the following questions. Suppose you have $4,000,000 when you retire and want to withdraw an equal amount each year for the next 35 years.
a) How much can you withdraw each year if you earn 8%
b) What if you can earn 12%?
c) What if the market failed and your earnings dropped to -.7%. How long would it take to drain your account if you did nothing about this loss pattern?
2. Retirement planning can be a bit of a headache. A close friend has decided to begin saving for her retirement. Keep the following in mind: She has 25 years until retirement. She wants to be able to withdraw $95,000 each year. She figures she has roughly 35 years that she will withdraw during her retirement. The interest rate to consider is 8%. Due to planning ahead, your friend will not make the first withdrawal until a year after she retires. The goal is to make equal annual deposits into her retirement fund account.
a) If she delays making deposits for one year and makes her last deposit on the day she retires, what amount must she deposit annually to be able to make the desired withdrawals at retirement?
b) Suppose your friend just inherited a large sum of money. She decided to make one lump-sum deposit today to cover her retirement needs. What amount does she have to deposit today?
c) Suppose your friend's employer will contribute to the account each year as part of the company's profit-sharing plan. In addition, your friend expects a distribution from a family trust several years from now. Her employer annually contributes $3,500. The trust fund will distribute in 25 years. The trust fund with distribute $50,000. What amount must she deposit annually now to be able to make the desired withdrawals at retirement?
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