Question

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

2) You are trying to decide how much to save for retirement. Assume you plan to save \$7,500 per year with the first investment made one year from now. You think you can earn 9.0​% per year on your investments and you plan to retire in 39 ​years, immediately after making your last \$7,500 investment.

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

b.​ If, instead of investing \$7,500 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 17 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 17th withdrawal​ (assume your savings will continue to earn 9.0​% in​ retirement)?

d.​ If, instead, you decide to withdraw \$464,000 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 \$1,500 per​ year, but you want to retire with \$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) \$190,000 saved just in​ case, how much would they have to save each year to reach their new​goal?

** Formulas are used in yellow excel cells**

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