You want to withdraw $100,000 every year for 35 years of retirement, and your first withdrawal will be one year after your last savings contribution. Assume you earn 4% APR compounded annually while you are retired. How much do you need to have saved to finance your retirement?
| Present value | = | Annual withdrawl * Present value of annuity of 1 | |||||||
| = | $ 1,00,000 | * | 18.66461 | ||||||
| = | $ 18,66,461.32 | ||||||||
| Thus, | |||||||||
| Required saving should be | $ 18,66,461.32 | ||||||||
| Working: | |||||||||
| Present value of annuity of 1 | = | (1-(1+i)^-n)/i | Where, | ||||||
| = | (1-(1+0.04)^-35)/0.04 | i | 4% | ||||||
| = | 18.66461 | n | 35 | ||||||
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