Daryl wishes to save money to provide for his retirement. Beginning one month from now, he will begin depositing a fixed amount into a retirement savings account that will earn 12% compounded monthly. He will make 360 such deposits. Then, one year after making his final deposit, he will withdraw $100,000 annually for 25 years. The fund will continue to earn 12% compounded monthly. How much should the monthly deposits be for his retirement plan?

Question

Quizplus · Accepted Answer

To find the monthly deposit, we need to calculate the future value of an annuity (the deposits) and set it equal to the present value of the withdrawals. The future value of the annuity formula is used for the deposits, and the present value of an annuity formula is used for the withdrawals. Solving these equations with the given interest rate and time periods, the monthly deposit comes out to approximately $214.21.

Daryl Wishes to Save Money to Provide for His Retirement