Question

Derek plans to retire on his 65th birthday. However, he plans to work part-time until he turns 74.00. During these years of part-time work, he will neither make deposits to nor take withdrawals from his retirement account. Exactly one year after the day he turns 74.0 when he fully retires, he will begin to make annual withdrawals of $112,331.00 from his retirement account until he turns 89.00. After this final withdrawal, he wants $1.49 million remaining in his account. He will make contributions to his retirement account from his 26th birthday to his 65th birthday. To reach his goal, what must the contributions be? Assume a 10.00% interest rate. (round to 2 decimals)

Answer #1

Amount required on 74th birthday is equal to present value of future withdrawals

= 112,331*PVAF(10%, 15 years) + 1,490,000*PVF(10%, 15 years)

= 112,331*7.6061 +1,490,000*0.2394

= $1,211,106.8191

Amount required on 65th birthday = 1,211,106.8191/(1.10)9

= $513,627.52

Future value of Annuity = Periodic Amount*[{(1+r)n โ 1}/r]

Let annual deposits be x

513,627.52 = x*[{(1.10)40 -1}/0.10]

513,627.52 = 442.592555x

X = $1,160.50

Hence, annual contribution required = $1,160.50

Derek plans to retire on his 65th birthday. However, he plans to
work part-time until he turns 74.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 74.0 when he fully retires, he will begin to make
annual withdrawals of $130,692.00 from his retirement account until
he turns 88.00. After this final withdrawal, he wants $1.38 million
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Derek plans to retire on his 65th birthday. However, he plans to
work part-time until he turns 74.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 74.0 when he fully retires, he will begin to make
annual withdrawals of $198,730.00 from his retirement account until
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Derek plans to retire on his 65th birthday. However, he plans to
work part-time until he turns 74.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 74.0 when he fully retires, he will begin to make
annual withdrawals of $176,595.00 from his retirement account until
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Derek plans to retire on his 65th birthday. However, he plans to
work part-time until he turns 74.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 74.0 when he fully retires, he will begin to make
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Derek plans to retire on his 65th birthday. However, he plans to
work part-time until he turns 74.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 74.0 when he fully retires, he will wants to have
$3,278,432.00 in his retirement account. He he will make
contributions to his retirement account from his 26th birthday to
his 65th birthday. To reach his...

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work part-time until he turns 74.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 74.0 when he fully retires, he will begin to make
annual withdrawals of $143,996.00 from his retirement account until
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9)#1
Derek plans to retire on his 65th birthday. However, he plans to
work part-time until he turns 70.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
day he turns 70.0 when he fully retires, he will begin to make
annual withdrawals of $101,516.00 from his retirement account until
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A) Derek plans to retire on his 65th birthday. However, he plans
to work part-time until he turns 72.00. During these years of
part-time work, he will neither make deposits to nor take
withdrawals from his retirement account. Exactly one year after the
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