Assume (a) that during your 30 years of retirement you plan to consume C^pi = $1

Question

Assume (a) that during your 30 years of retirement you plan to consume C^pi = $100,000 per year and (b) that during this entire period you will earn R^pi = 8% on your money. However, instead of retiring with the appropriate value of PV(C, R, D) to fund your retirement, you have only 75% of PV(C, R, D). In other words, you are 25% underfunded at retirement. This obviously means that if you continue spending C^pi then you will run out of money well before the age of death at period D. Compute the period during which you will run out of money. Derive a general expression for the "ruin period" if you retire with z

Explanation / Answer

1. If i can manage only75% of PV(C,R,D) then I will run out of money for almost 15.4 years.

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