Question

John is currently 28 years old, expect to retire at age 65 and live until age...

John is currently 28 years old, expect to retire at age 65 and live until age 85. John's real labour income is $45,000 per year and he has not yet accumulated any assets. Assume the interest rate is 2% per year and no taxes. If John wants to maintain a same level of consumption spending every year. What is John's permanent income?

Select one:

a. $34,545.96

b. $33,432.53

c. $35,654.98

d. $32,435.86

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Homework Answers

Answer #1
Particulars Amount
Withdrawal for 20 years      34,545.96
× PVAF       16.35143
Required retirement fund    564,875.96
Annual income      45,000.00
Less: consumption    (34,545.96)
Annual savings      10,454.04
× FVAF       54.03425
Future value of savings    564,876.26

Answer is $34,545.96

At this consumption level savings now can maintain same consumption after retirement.

please rate.

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