John Adams plans to retire at the age of 62.He wants an annual income of $60,000 per year.He believes that he will live to be 87.He will draw the money at the end of each year.How much money will he need when he retires in order to support his $60,000 annual life style if he will average 12 percent per year on his retirement account?
A)$505,302
B)$470,588
C)$527,059
D)$439,800

Question

Quizplus · Accepted Answer

To determine how much money John Adams will need when he retires, we can use the present value formula:

PV = PMT * ((1 - (1 + r)^-n) / r)

Where: 
PV = present value 
PMT = annual payment 
r = interest rate per period 
n = number of periods

In this case, PMT = $60,000, r = 12%, n = 25 (since he will retire at age 62 and live to be 87).

Plugging these values into the equation, we get:

PV = $60,000 * ((1 - (1 + 0.12)^-25) / 0.12) 
PV = $470,588

Therefore, John Adams will need $470,588 when he retires in order to support his $60,000 annual lifestyle. The best choice is B.

John Adams Plans to Retire at the Age of 62