Your father, who is 60, plans to retire in 2 years, and he expects to live independently for 3 years.He wants a retirement income which has, in the first year, the same purchasing power as R40,000 has today.However, his retirement income will be of a fixed amount, so his real income will decline over time.His retirement income will start the day he retires, 2 years from today, and he will receive a total of 3 retirement payments.Inflation is expected to be constant at 5 percent.Your father has R100,000 in savings now, and he can earn 8 percent on savings now and in the future.How much must he save each year, starting today, to meet his retirement goals?

Question

Quizplus · Accepted Answer

To calculate the amount your father needs to save each year, we first determine the future value of the retirement income needed, considering inflation and the time value of money. Then, we calculate the present value of these future payments and determine the annual savings required to reach this amount, considering the current savings and the interest rate.

Your Father, Who Is 60, Plans to Retire in 2