Question

Suppose you plan to save $8,000 per year for the 40 years you are working. In addition to the amount you are saving each year, you expect to sell your house for $500,000 in year 35 and deposit this money into your account. How much can you withdraw in equal amounts each year for the 35 years you are retired. The interest rate you will earn during the 40 years you are saving is 8%. Once you retire, you’ll reduce the amount of stock you have in your portfolio and you will now earn a return of 5% during the 35 years you are retired. Assume that you begin saving in one year and your first withdrawal is in year 41.

Answer 1

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