Question

Suppose that you are just about to retire, and you just turned 65. Your personal and family health history is such that you forecast that you will live to age 79.

In retirement, you would like to have purchasing power of
$60,000 (i.e., real dollars) before taxes. Suppose, for our
example, that you anticipate receiving $20,000 in
inflation-adjusted Social Security payments each year. Hence, your
portfolio will need to provide $40,000 in real dollars each year.
Assume that each payment is ** at the start of each year
in retirement**, where the first payment is
immediately. How much do you need to have in your retirement
account at retirement (in real dollars)? Assume that your portfolio
earns a real annual rate of return of 6.44%, compounded annually
during retirement.

Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. Do not type the $ symbol.

Answer #1

Note - in the PVAF formula, " i " denotes interest rate, which is = 6.44%

= 0.0644 (in numerals)

Also, " n " is number of period from age of 66 till 79, which is 14 years

Therefore, computation of PVAF is done accordingly using Calculator.

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