When you retire 40 years from now you plan to make 10 annual withdrawals from your savings account at the end of each year. That is, you will need $130,000 each year for 2 years, then $145,000 each year for 3 years, $165,000 each year for 4 years, then a final withdrawal of $250,000 in the final year of retirement. You want to start saving for retirement now and plan to make end of year annual payments for 20 years into an account that yields 8 percent compounded annually. After these deposits you plan to leave the money in the savings account until retirement earning the same interest. (a) What is the value of these withdrawals at the end of year 40? (b) What is the value of these withdrawals at the end of year 20? (c ) What should these 20 annual payments be in order to satisfy your retirement needs?
When you retire 40 years from now you plan to make 10 annual withdrawals from your savings account at the end of each year. That is, you will need $130,000 each year for 2 years, then $145,000 each year for 3 years, $165,000 each year for 4 years, then a final withdrawal of $250,000 in the final year of retirement.
You want to start saving for retirement now and plan to make end of year annual payments for 20 years into an account that yields 8 percent compounded annually. After these deposits you plan to leave the money in the savings account until retirement earning the same interest.
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(a) |
What is the value of these withdrawals at the end of year 40? |
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(b) |
What is the value of these withdrawals at the end of year 20? |
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(c ) |
What should these 20 annual payments be in order to satisfy your retirement needs? |
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