Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / Nora is planning for retirement
Nora is planning for retirement. She’d like to retire on her 65th birthday, and then be able to withdraw $45,000 on each following birthday for the next 25 years. She makes yearly deposits starting on her 42th birthday and continuing until her 65th birthday (right before she retires). Her investment accounts earn 5% annual effective interest. How much should her yearly deposits be? Show all work.
Step 1: Find the amount required on retirement
Annuity=45000
rate=r=5%
n=25
PV of annuity= A*(1-1/(1+r)^n)/r
=45000*(1-1/(1+5%)^25)/5%
=45000*14.09394457
=$634,227.51
Step 2: To get the above value, find annuity required
FV= $634,227.51
rate=r=5%
n= 65-42+1 = 24
FV of annuity= A* ((1+rate)^n-1)/rate
634,227.51= A*((1+5%)^24-1)/5%)
634,227.51=A*44.50199887
A= $14,251.66
Finalanswer=$14,251.66
