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 your retirement account to receive this income, if the annual interest rate is 9 percent per year? (Assume that the payments start on the day of your retirement.)
A)$736,693.47
B)$802,995.88
C)$2,043,750.21
D)$1,427,831.93

Question

Quizplus · Accepted Answer

To calculate the amount you need in your retirement account, you can use the formula for present value of an annuity:

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

where PV is the present value (or how much you need in your retirement account), PMT is the annual income you want to receive, r is the annual interest rate, and n is the number of years you expect to receive the income (which is 25 in this case).

Plugging in the numbers, we get:

PV = $75,000 x [1 - (1 + 0.09)^(-25)]/0.09 = $802,995.88

Therefore, you would need to have $802,995.88 saved in your retirement account to receive an annual income of $75,000 for 25 years, assuming an annual interest rate of 9 percent.

After Retirement, You Expect to Live for 25 Years