You are planning your retirement in 10 years. You currently have $162,000 in a b

Question

You are planning your retirement in 10 years. You currently have $162,000 in a bond account and $602,000 in a stock account. You plan to add $7,800 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 11 percent and the bond account will earn a return of 7.5 percent. When you retire, you plan to withdraw an equal amount for each of the next 23 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 6.75 percent.

How much can you withdraw each year in your retirement? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations.Round your answer to 2 decimal places (e.g., 32.16).)

You are planning your retirement in 10 years. You currently have $162,000 in a bond account and $602,000 in a stock account. You plan to add $7,800 per year at the end of each of the next 10 years to your bond account. The stock account will earn a return of 11 percent and the bond account will earn a return of 7.5 percent. When you retire, you plan to withdraw an equal amount for each of the next 23 years at the end of each year and have nothing left. Additionally, when you retire you will transfer your money to an account that earns 6.75 percent.

How much can you withdraw each year in your retirement? (Enter rounded answer as directed, but do not use rounded numbers in intermediate calculations.Round your answer to 2 decimal places (e.g., 32.16).)

Explanation / Answer

Amount accumulate at the time of retiremment = FV of Current Investment in Bond + FV of Current Investment in Stock + FV of annuity deposited in bond

Amount accumulate at the time of retiremment = 162000*(1+7.5%)^10 + 602000*(1+11%)^10 + 7800*((1+7.5%)^10 -1)/7.5%

Amount accumulate at the time of retiremment = $ 2,153,565.83

Amount withdrawl each year = Amount accumulate at the time of retiremment/Annuity factor

Amount withdrawl each year = 2153565.83/((1-(1+6.75%)^-23)/6.75%)

Amount withdrawl each year = $ 186,991.24

Answer

Amount withdrawl each year = $ 186,991.24

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

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