You have decided that you will need $350,000 above what your current retirement

Question

You have decided that you will need $350,000 above what your current retirement plan contains to survive and have a little fun when you retire. At the age of 30, you decide to start putting an amount into an annuity once a month. The account earns 5.5% compounded monthly. You plan to retire at the age of 65. Your savings plan is for exactly 35 years.

1. How much will you need to put into this plan each month? _____________________

2. How much total will you put into this plan? __________________________________

3. How much interest did this plan earn while investing during the 35 years? ___________

Before you retire, you decide that you will not take all of the money out at once. Instead, you would like to draw equal monthly payments out until you are 80. Assume the interest stays the same. How much can you draw out each month over this 15-year period?

4. Answer _____________________________________________________________

How much did the annuity pay you in interest over this 15-year period?

5. Answer ______________________________________________________________

What was the total dollars the plan paid you in retirement?

6.Answer _____________________________________________________________

How much of this was earned from interest (remember this amount will include the interest earned while investing in the plan and while receiving money from the plan)?

7. Answer ______________________________________________________________

So basically the amount you contributed to your retirement was approximately what percentage of the total amount received?

8. 10% , 25%, 50%, 75%

Explanation / Answer

1) If we put 1000 everymonth for 35 years monthly amount got at the end = 1269532

Hence for 350000 monthly amount needed = 3627.23

2) Total money deposited = 3627.23x35x12 = 1523438.40

3) Interest amount = 197561.60

4) MOnthly 2860

5) 514800 (2860x12x15)-350000 = 164800

6)514800

7)  Interest = 514800-1523438.40 = 362361.60

8) 514800(100)/1523438.40= 337.71%

Nearly 337.71 more than 3 times we get back after retirement.

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