You have just tuned 22 years old, reooived your bachelor\'s degree, and accepted

Question

You have just tuned 22 years old, reooived your bachelor's degree, and accepted your first job. Now you must decide how much money to put into your retirement plan. The plan works as follows Every dolar ithe plan orns 7.3% per year. You cannot make withdrawals until you retire on your 65th birthday. A that you a make withdrawals as you see fit You decide that you will plan to live to 100 and work until you turn 65. You estimate that to live comfortably in retirement, you will need $120,000 per yoar, starting at the end of the first year of retirement and ending on your 100th birthday. You will contribute the same amount to the plan at the end of every year that you work. How much do you need to contribute each year to fund your retirement? Your annual contribution should be (Round to the nearest cent.) Enter your answer in the answer box. Save for Later MacBook Air

Explanation / Answer

Amount to be accumulated at 65 years of age = PV of the annual withdrawals for 35 years form the end of the 65th year to end of 99th year = 120000*(1.073^35-1)/(0.073*1.073^35) = $   15,04,241.18 The above amount is the FV of the annual deposits to be made. Hence, using the formula for finding FV of an annuity, the annual contribution to be made = 1504241.18*0.073/(1.073^34-1) = $         11,008.87

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