Question

You just turned 28 and are now seriously planning for your retirement. You wish to retire two years earlier than the mandatory retirement age of 65. You hope to be able to make end-of-month withdrawals from your retirement account of P25,000 per month for a 30-year period after that.

Your plan is to fund your retirement by making monthly deposits between now and when you retire. The initial monthly deposit will be made at the end of the coming month.

How much monthly deposit should you make if you can earn 12 percent per annum in your retirement account? (Ignore taxes.)

Show your computations.

Answer #1

The first step is to calculate the size of the retirement fund. The size of the fund is calculated using present value of annuity equation.

**Size of retiirement fund = $2,430,458.28**

**Using the future value of annuity equation, we can find
out how much monthly deposit should be made.**

Solving for A in the above equation, we get

**The amount of monthly deposit to be made = $
377.93**

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