An individual wants to have $57,000 per year to live on when she retires in 27 years. The individual is planning on living for 23 years after retirement. If the investor can earn 6.2% during her retirement years and 9.10% during her working years, how much should she be saving during her working life? (Hint: Treat all calculations as annuities.)

Question

Quizplus · Accepted Answer

First, determine how much she'll need to have in her account as of her retirement date to be able to withdraw $57,000 per year for 23 years. Calculator entries are N = 23, I/Y = 6.2, PMT = −57,000, FV = 0, CPT PV → 2,747,950.34.
Next, calculate how much she'll have to deposit each year for the next 27 years to raise this amount. Calculator entries are N = 27, I/Y = 9.1, PV = 0, FV = −2,747,950.34, CPT PMT → 26,317.18.

An Individual Wants to Have $57,000 Per Year to Live