You have just turned 30 years old, have just received your MBA, and have accepted your
first job. Now you must decide how much money to put into your retirement plan. The plan
works as follows: Every dollar in the plan earns 7% per year. You cannot make withdrawals
until you retire on your sixty-fifth birthday. After that point, you can make withdrawals as you
see fit. You decide that you will plan to live to 100 and work until you turn 65. You estimate
that to live comfortably in retirement, you will need $100,000 per year starting at the end of
the first year of retirement and ending on your 100th birthday. You will contribute the same
amount to the plan at the end of every year that you work. How much do you need to
contribute each year to fund your retirement?
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