Question Details: Your father intends to retire in 4 years. He expects to live for 12 years after he retires. He curently has $35,000 in his investment account. He projects that he will require $15,000 per year during his retirement years, starting one year after he retires. How much would he have to save in each of the next 4 years so that he will have enough money to fund his retirement? He expects to earn an average annual rate of return of 7% per year.
Thanks for any help
2007-10-08 11:50:37 · 1 answers · asked by z w 1 in Education & Reference ➔ Homework Help
If he wants 7% pa, an income of $15000 and no growth then his fund needs to be 15000/7 x 100 = 1500000/7 = $214285. He already has $35000 so needs to save an extra $179285 or $44821 per year. This does not allow for dipping into capital. If he did that the capital would produce a lesser amount of interest each year but ideally would equal 'Nil' on the day he died.
2007-10-08 11:59:33 · answer #1 · answered by quatt47 7 · 0⤊ 0⤋