You have decided that you will need $350,000 above what your current retirement

Question

You have decided that you will need $350,000 above what your current retirement plan contains to survive and have a little fun when you retire. At the age of 30, you decide to start putting an amount into an annuity once a month. The account earns 5.5% compounded monthly. You plan to retire at the age of 65. Your savings plan is for exactly 35 years. Before you retire, you decide that you will not take all of the money out at once. Instead, you would like to draw equal monthly payments out until you are 80. Assume the interest stays the same. How much can you draw out each month over this 15-year period? 4. Answer _____________________________________________________________ How much did the annuity pay you in interest over this 15-year period? 5. Answer ______________________________________________________________

Explanation / Answer

4. The amount that will be drawn out each month over 180 months = PVr/(1-(1+r)^-n)

PV =Principal value =350000, r =0.55 n =180
= 350,000*(.055/12)/(1-(1+.055/12)^-180) = $2,859.79

5.(2859.79)*180 - 3,50,000

= $1,64,762.2
The annuity pay us interest over this 15 year period =$164,762.86

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