Question

Suppose you are 30 years old and want to retire at the age of age 70 and expect to live another 20 years. On the day you retire, you want to have $1,000,000 in your retirement savings account.

i. If you invest monthly starting one month from today and your investment earns 6.0 percent per year, How much money do you need to invest every month until you retire?

ii. Now you’re retired with $1,000,000 and you have 20 more years. You are conservatively expecting to earn 5% on your money during your retirement. Life is uncertain. So at the end of 20^th year of retirement you still want to have $100,000 just in case you will live more. How much can you withdraw from your retirement savings each month if you plan to have $100,000 at the end of your 20^th year after your retirement?

Answer 1