Question

# Suppose you are 35 years old and would like to retire at age 60. Furthermore, you...

Suppose you are 35 years old and would like to retire at age 60. Furthermore, you would like to have a retirement fund from which you can draw an income of ​\$150,000 per year-​forever! How much would you need to deposit each month to do​ this? Assume a constant APR of 8% and that the compounding and payment periods are the same.

To draw \$150,000 per​ year, there must be ​\$___ in your savings account when you retire.

You can reach your goal by making monthly deposits of \$___.

To draw \$150,000 per year forever, the amount that must be in the savings account is calculated using the present value of perpetuity equation

There must be ​\$ 1,875,000 in your savings account when you retire.

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The monthly deposit to be made is found using the future value of annuity equation

Solving for the value of A in the above equation,

A = \$ 1971.55

The goal can be reached by making monthly deposits of \$ 1971.55

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