You have just started your own engineering consulting firm and now you are makin
ID: 2620772 • Letter: Y
Question
You have just started your own engineering consulting firm and now you are making a retirement plan. You have found an investment account that pays 8% APR compounded annually.
You will retire 20 years from today, and on that day you will make the first withdrawal of $110,000 from this account. You will continue to make withdrawals from this account annually at the beginning of each year for a total of 25 withdrawals, and the amount withdrawn will increase 5% each year after the first withdrawal of $110,000 at 20 years from today.
How much money must be in this account 20 years from today to cover all your retirement withdrawals?
Explanation / Answer
Value required in retirement account in 20 years = P * (1 - (1+g/1+r)^n)/ (r - g)
= 110000 * (1 - (1.05/1.08)^25)/(.08 - .05)
= $ 1853615.67
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.