By the end of each year, you contribute an equal amount of $3,000 to your retire

Question

By the end of each year, you contribute an equal amount of $3,000 to your retirement fund portfolio, which on average earns an annual return of 12.5%. The contribution continues until your retirement.

Using Microsoft Excel Finance Formulas:  You retire 30 years later. For your post-retirement life (which last approximately another 20 years), every year you withdraw and spend an equal amount of annuity payment from your trust fund account. What would be the annual payment amount you receive if you plan to leave no money to your heirs?

Explanation / Answer

here is the two requirement. First is to calculate future value of annuity untill your retirement of 30 years from nowand second one is the annual equivlent receiving for 20 years of accumulated amount.

Step-1: Calculate the future value of annual deposit:

Step-2: Calculate the annual equivlent receivingl to make amount 0.

Future value of annuity = P*{(1+i)^n-1)/i} p = periodical deposit = 3000 = 3000*{(1+.125)^30-1/.125} n = no. of periods = 30 = $ 797,839 i = interest rate per period = 12.50%

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