Beth is 35 years old and wants to set up a payout annuity. She plans to retire at age 65 and wants to receive payouts for 20 years. She wants the payouts to have an annual C.O.L.A. of 2.9%. If the first payout is to have the same purchasing power as $24,000 today, how big should that payout be, assuming 2.9% inflation?

Beth is 35 years old and wants to set up a payout annuity. She plans to retire at age 65 and wants to receive payouts for 20 years. She wants the payouts to have an annual C.O.L.A. of 2.9%. If the first payout is to have the same purchasing power as $24,000 today, how big should that payout be, assuming 2.9% inflation?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 8E

See similar textbooks

Similar questions

Shelly Franks is planning for her retirement, so she is setting up a payout annuity with her bank. She is now 35 years old, and she will retire when she is 65. She wants to receive annual payouts for twenty years, and she wants those payouts to receive an annual COLA of 4%. (a) She wants her first payout to have the same purchasing power as does $17,000 today. How big should that payout be if she assumes inflation of 4% per year? (b) How much money must she deposit when she is 65 if her money earns 8.3% interest per year? (c) How large a monthly payment must she make if she saves for her payout annuity with an ordinary annuity? (The two annuities pay the same interest rate.) (d) How large a monthly payment would she make if she waits until she is 40 before starting her ordinary annuity?
Your aunt is about to retire, and she wants to sell some of her stock and buy an annuity that will provide her with income of $50,000 per year for 30 years, beginning a year from today. The going rate on such annuities is 7.25%. How much would it cost her to buy such an annuity today?
A woman desires to have $400,000 in a savings account when she retires in 20 years. Because of the effects of inflation on spending power, she stipulates that her future “nest egg” will be equivalent to $400,000 in today’s purchasing power. If the expected average inflation rate is 7% per year and the savings account earns 5% per year, what lump-sum amount of money should the woman deposit now in her savings account?
Suppose you are 20 years old and plan to retire at exactly 60 years old. you will need to withdraw $5,000 per year from a retirement fund to supplement your social security payments. You expect to live to the age of 85. How much money should you place in the retirement fund each year to reach your retirement goal if you can earn 12% interest per year from the fund?
Your uncle is about to retire, and he wants to buy an annuity that will provide him with $6,800 of income a year for 14 years, with the first payment coming immediately. The going rate on such annuities is 5.25%. How much would it cost him to buy the annuity today?
Mr. Chew, a retiree, expects to live for the next 20 years and would like to receive a regular retirement income by purchasing an immediate annuity. His desired retirement income is $24,000 per year. The regular pay out is paid immediately on purchase of the annuity. The projected rate of return of the annuity product is 2.5%. To purchase the annuity today, how much Mr Chew would require a lump sum of?
ou retire at age 59 and decide to wait until age 70 to begin receiving Social Security payments. (Why? Because waiting until ge 70 maximizes your Social Security payments.) In the meantime, you have a nest egg of $900,000 that you will use to purchase an annuity that will end when you turn 70. If the annuity has an APR of 7%, what is the monthly annuity yield? (Round your answer to the nearest cent.)
Molly would like to spend $55,000 (inflation adjusted, in today's dollars) each year in retirement for 35 years (beginning of year). She believes she can earn a 8.5% rate of return pre-retirement, 5.5% during retirement, and inflation will be 3.0%. She has 30 years until he plans on retiring and she's already saved $50,000 towards her goal. Approx. how much does she need at retirement to accomplish her goal? O $4,236,000 $3,200,023 O $2,759,000 O $1,980,000 4
Using the formula: Oshri is planning on his retirement, so he is setting up a payout annuity with his bank. He is now 30 years old, and he will retire when he's 60. He wants to receive annual payouts for 25 years, and he wants those payouts to receive an annual COLA of 3.5%. A. He wants his first payout to have the same purchasing power as does $13,000 today. How big should that payout be if he assumes inflation of 3.5% per year?
A retiree wants to purchase an annuity that will provide her with end-of-year payments for the next 30 years. She wants the first annual payment to be $15,000, and for the payments to grow by 3% each year thereafter. If she can earn 5.5% compounded annually on her investments, what is the purchase price of the annuity today
Adele is planning for retirement. She would like to have $75,000 in her hand at the beginning of her first year of retirement at age 65 to live on for the year. She estimates that the amount will have to grow by 6% every year to keep up with inflation. What APR (nominal rate per year) should her retirement account earn if it is compounded continuously? She plans to deposit $21,000 on her 40th birthday and plans to keep increasing the deposits by 6% every year and till her 64th birthday. She estimates her life expectancy to be 85, meaning she would like to have the last retirement payment on her 85th birthday.
Sara Sharp, a 30-year-old insurance broker, decided to start a retirement plan. She figures that her income for the next 20 years will be sufficient to deposit $300 at the end of each month into her retirement plan. She will then let the money sit for another 10 years until she is 60 years old. If Sarah’s retirement plan earns 5.75% compounded monthly, what amount will she have when she turns 60?