After retirement, you expect to live for 25 years. You would like to have $75,000 income each year. How much should you have saved in the retirement to receive this income, if the interest is 9% per year (assume that the payments start one year after the retirement)?
A) $736,693.47
B) $6,352,567.22
C) $1,875,000
D) None of the above

Question

Quizplus · Accepted Answer

To calculate the required savings, we need to use the Present Value of Annuity formula:

PV = PMT x [(1 - (1 + r)^-n) / r]

Where:
PMT = Annual income required = $75,000
r = Interest rate per year = 9%
n = Number of years of retirement = 25

Substituting the values, we get:

PV = $75,000 x [(1 - (1 + 0.09)^-25) / 0.09] = $736,693.47

Therefore, the required savings is $736,693.47. Option A is the correct answer.

After Retirement, You Expect to Live for 25 Years