your sister turned 35 today and she is planning to save $7 000 per year for reti

Question

your sister turned 35 today and she is planning to save $7 000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that's expected to provide a return of 7.5 % per year. She plans to retire 30 years from today , when she turns 65, and she expects to live for 25 y ears after retirement, to age 90. Under these assumptions, how much can she spend each year after she retires? Her first withdrawal will be made at the end of her first retirement year.

Explanation / Answer

Part 1: FV of annuity is given by FV=FV(Rate,nper,PMT) = FV(7.5%,30,-7000) = X SO She will have X at end of 30 yrs. Part 2: Annual withdrawl PMT = PMT(Rate,nper,PV,FV) = PMT(7.5%,25,-792982,0) ie PMT = Y So She can spend Y each year till she is 90 Try to Calculate X and Y...! If still any doubt plz ask me thank you...! :)

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