Assume you going to work for the next 38 years and save annual payments of $3000

Question

Assume you going to work for the next 38 years and save annual payments of $3000 toward retirement account the first payment will be made at the end of year 1 and the last payment will be made at the year of 38 the retirement account will earn interest rate of 8%if you expect to live for 25 years after your retirement and during the time your account will earn 3% interest what will be your annual end of year retirement income drawdown Assume you going to work for the next 38 years and save annual payments of $3000 toward retirement account the first payment will be made at the end of year 1 and the last payment will be made at the year of 38 the retirement account will earn interest rate of 8%if you expect to live for 25 years after your retirement and during the time your account will earn 3% interest what will be your annual end of year retirement income drawdown

Explanation / Answer

Step-1:future value of annual saving for 38 years Future Value of Annuity = P*((((1+i)^n)-1)/i) Where, = 3000*((((1+0.08)^38)-1)/0.08) P = $    3,000 = $ 6,60,948 i =           0.08 n = 38 Step-2:Annual end of year income drawdown Annual Drawdown = Present Value/Cumulative discount factor = $ 6,60,948 /      17.413 = $     37,957 Working: Cumulative discount factor = (1-(1+i)^-n)/i Where, = (1-(1+0.03)^-25)/0.03 i =           0.03 =         17.413 n = 25 So, annual end of year drawdown is $ 37,957

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