Question

The client who gets enrolled in the pension plan at age 35 needs to make an annual deposit till age 65 ( the age of retirement). After retirement, he/she plans to withdraw $30,000 every year until 80. Suppose the annual interest rate is 6%. Assume all the deposits and withdrawals happen at the end of each year. (a) How much annual deposit should the client make?  (b)  [Use DataTable in Excel] Sensitivity: What is the size of the annual deposit if the client expect to withdraw $35,000, $40,000,$45,000, $50,000, $55,000, or $60,000 every year after retirement ?

Answer 1

	Annual withdrawal	Amount required on retirement	Annual deposit required
a	30000	$291,367.47	$3,685.48
b	35000	$339,928.71	$4,299.73
	40000	$388,489.96	$4,913.98
	45000	$437,051.20	$5,528.22
	50000	$485,612.45	$6,142.47
	55000	$534,173.69	$6,756.72
	60000	$582,734.94	$7,370.96

WORKINGS