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Homework answers / question archive / Shawn Spencer just turned 35 and realized that he has not saved any money for retirement
Shawn Spencer just turned 35 and realized that he has not saved any money for retirement. Shawn would like to retire as soon as he turns 56 in 21 years. He wants to save enough money so that he can withdraw $52,500 at the beginning of each year during retirement. If he expects to live until the day he turns 93, how much will he need to have saved by the time he retires? Assume that he will be able to earn an annual rate of 4.5% during retirement. (5 points) 7 3 Total Savings Needed 0 1 2 3 4 5 6 7 8 Shawn plans to make the first deposit into his retirement account today, and to make equal sized deposits at the beginning of each year until he retires. If his account is able to earn 9.5% each year until he retires, how large will each deposit need to be to fully cover his expenses during retirement?
1. Use PV function in EXCEL to find the savings needed
=PV(rate,nper,pmt,fv,type)
rate=4.5%
nper=38 years
pmt=52500
fv=0
type=1 (withdrawals happens at the begining of the year)
=PV(4.5%,38,52500,0,1)=990,267.59
Total savings needed=$990,267.59
2. use PMT function in EXCEL to find annual deposit amount
=PMT(rate,nper,pv,fv,type)
rate=9.5%
nper=22 years
pv=0
fv=990267.59
type=1
=PMT(9.5%,22,0,990267.59,1)=13500.05
Annual deposit=$13500.05
