Ted has just turned 30 years old. he has currently accumulated $50,000 toward hi

Question

Ted has just turned 30 years old. he has currently accumulated $50,000 toward his planned retirement at age 60. He wants to accumulate enough money over the next 30 years to provide for a 20-year retirement annuity of $120,000 at the beginning of each year, starting with his 60th birthday. He plans to save $5,000 at the end of each year of the next 10 years. What equal amounts must he save at the end of years 11 through 30 to meet his objective? The interest rate for the first 10 years will be 5%. After that time, the interest rate is expected to be 7%.

Draw timelines and show all work/calculations.

Explanation / Answer

let savings for year 11 to 30 = A so to meet Bob requirements 5000*FVIFA(5%,10) + A*FVIFA(7%,20) = 120000*PVIFA(7%,20) 5000*12.5779 + A*40.9955 = 120000*10.5940 A = (120000*10.5940-5000*12.5779)/40.9955 A =29476.17 per year

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.