ou want to be able to withdraw $25,000 from your account each year for 20 years

Question

ou want to be able to withdraw $25,000 from your account each year for 20 years after you retire. If you expect to retire in 15 years and your account earns 7.8% interest while saving for retirement and 7.3% interest while retired:
Round your answers to the nearest cent as needed.

a) How much will you need to have when you retire?
$

b) How much will you need to deposit each month until retirement to achieve your retirement goals?
$

c) How much did you deposit into you retirement account?
$

d) How much did you receive in payments during retirement?
$

e) How much of the money you received was interest?

Explanation / Answer

For withdrawal of25000 each year there is an annuity future value formula to be used since this payment is equal to amount at retirement compounded at 7.3% By this Annuity FV = FV of principle at retirement FV(7.3%,20,25000) $ 1,059,093.90 P(1.073)^20 $ 1,059,093.90 $ 4.09 *P P 258785.6 Amount at retirement This amount is to be deposited monthly during 15 years at 7.8% $ 281.08 Amount to be deposited monthly PMT(7.8%/12,300,,B10) $ 84,323.49 Amount deposited in retirement (281.08*300) 500000 Amount received in retirement (25000*20) $ 415,676.51 Amount received as interest (500000-84323.49)

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