Your sister turned 35 today and she is planning to save $7,500.00 per year for r

Question

Your sister turned 35 today and she is planning to save $7,500.00 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% per year. She plans to retire 30 years from today, when she turns 65, and she expects to live for 20 years after retirement, to age 85. 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. PLEASE SHOW WORK THANK YOU.

Explanation / Answer

Amount she will have at the time of her retirment i.e after 30 years is:

use fv formuale in excel

=fv(rate,nper,pmt,pv,type)

=FV(7%,30,-7500,,0)=$708,455.9

use pmt formuale here to find how much she can spend each year after she retires:

=pmt(rate,nper,pv,fv,type)

=PMT(7%,20,708455.9,,0)

=$66,873.22

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