I plan to retire in 45 years. At his time I will be 70 years old. I expect to li
ID: 2692552 • Letter: I
Question
I plan to retire in 45 years. At his time I will be 70 years old. I expect to live until I am 90. I believe I will need $120,000 per year to live once I retire. How much wealth will I need when I reach the age of 70? Assume a risk free rate of 3% for my retirement years. How much will I have to save beginning today if interest is paid at the end of each year and is compounded annually? Assume an investment rate of 9% from age 45 to retirement. (a) $22,343.23 (b) $21,077.66 (c) $17,047.43 (d) $24,087.12 PLEASE SHOW YOUR WORK!Explanation / Answer
wealth neede when I reach the age of 70 = $120,000/1.03 +$120,000/1.03^2 + $120,000/1.03^3 .........................$120,000/1.03^20 =$1,785,296.98 let yearly savings be x $1,785,296.98 = x*(1+9%)^24 + x*(1+9%)^23 + x*(1+9%)^22..............x*(1+9%)^0 x= $21,077.66 (b) $21,077.66