Samuel Survivor is planning to save for retirement 35 years from now.He expects to live 25 years beyond that,and would like an annual retirement income of $38,500 after tax of 30%.What is the lump sum needed to fund retirement,at an expected annual return of 11.2%?

Question

Quizplus · Accepted Answer

The after-tax income needed is $38,500 / (1 - 0.30) = $55,000. Using the present value of annuity formula, the lump sum needed is calculated as $55,000 * [(1 - (1 + 0.112)^-25) / 0.112] = $456,515.

Samuel Survivor Is Planning to Save for Retirement 35