Using the Time Value of Money charts provided, answer the following question. (Note to Instructors: Provide the appropriate tables to students from Personal Finance, Seventh Edition, Appendix C: Financial Tables.) Jack is 35 years old and is planning to retire at age 65. Based on a variety of factors, he is planning a retirement of 20 years. Jack determines that he will need $20,000 per year during his 20 years of retirement. If he can invest at 9%, how much will he need to save each year beginning today to reach his goal?
A) $11,428.57
B) $6,086.00
C) $1,339.47
D) $20,000.00

Question

Quizplus · Accepted Answer

To solve this, we use the present value of an annuity formula to find out how much Jack needs at the start of his retirement, and then use the future value of an annuity formula to determine how much he needs to save each year. Given a 9% investment rate, the amount he needs to save annually to reach his goal, considering both the accumulation phase (30 years until retirement) and the distribution phase (20 years of retirement), aligns with the calculations for option C.

Using the Time Value of Money Charts Provided, Answer the Following