Question

# You are trying to decide how much to save for retirement. Assume you plan to save...

You are trying to decide how much to save for retirement. Assume you plan to save

\$ 5 comma 000\$5,000

per year with the first investment made one year from now. You think you can earn

7.07.0​%

per year on your investments and you plan to retire in

2727

​years, immediately after making your last

\$ 5 comma 000\$5,000

investment.

a. How much will you have in your retirement account on the day you​ retire?

\$ 5 comma 000\$5,000

per​ year, you wanted to make one​ lump-sum investment today for your retirement that will result in the same retirement​ saving, how much would that lump sum need to​ be?

c. If you hope to live for

2424

years in​ retirement, how much can you withdraw every year in retirement​ (starting one year after​ retirement) so that you will just exhaust your savings with the

2424th

withdrawal​ (assume your savings will continue to earn

7.07.0​%

in​ retirement)?

d.​ If, instead, you decide to withdraw

\$ 74 comma 000\$74,000

per year in retirement​ (again with the first withdrawal one year after​ retiring), how many years will it take until you exhaust your​ savings? (Use​ trial-and-error, a financial​ calculator: solve for​ "N", or​ Excel: function​ NPER)

e. Assuming the most you can afford to save is

\$ 1 comma 000\$1,000

per​ year, but you want to retire with

\$ 1 comma 000 comma 000\$1,000,000

in your investment​ account, how high of a return do you need to earn on your​ investments? (Use​ trial-and-error, a financial​ calculator: solve for the interest​ rate, or​ Excel: function​ RATE)

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