You plan to retire in 28 years. At the point of retirement, you want to be able to withdraw 25,682 at the end of each year forever. Assume that you earn a 7.1% rate of return prior to retirement and an 5.69% rate of return after retirement. If you do not want to make any further contributions to your retirement fund, how much do you need today? Round answer to the nearest dollar.
Amount of retirement fund required = 25,682/ 5.69% = 451,353.25
Present value of money: | = | FV/ (1+r) ^N | |||
Input | |||||
FV | Future value | FV= | $ 451,353.25 | ||
I | Rate of interest | r= | 7.1% | ||
N | Number of years | N= | 28 | ||
PV | Present value | = | 451353.25/ (1+0.071)^28 | ||
PMT not applicable | = | $ 66,131.96 |
Answer is $66,131.96
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