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You are 29 years? old, and decide to save $12,500 each year? (with the first deposit one year from? now), in an account paying 9% interest per year
You are 29 years? old, and decide to save $12,500 each year? (with the first deposit one year from? now), in an account paying 9% interest per year. You will make your last deposit 36 years from now when you retire at age 65. During? retirement, you plan to withdraw funds from the account at the end of each year? (so your first withdrawal is at age? 66). What constant amount will you be able to withdraw each year if you want the funds to last until you are age 95?? The total savings at age 65 is? ?(Round to the nearest? dollar.)
Expert Solution
We can calculate the total savings at age 65 by using the following formula in excel:-
=fv(rate,nper,-pmt,pv)
Here,
FV = Total savngs at age 65
Rate = 9%
Nper = 36 periods
Pmt = $12,500
PV = $0
Substituting the values in formula:
= fv(9%,36,-12500,0)
= $2,951,559.03 Or $2,951,559
We can calculate the annual withdrawal by using the following formula in excel:-
=pmt(rate,nper,-pv,fv)
Here,
Pmt = Annual withdrawal
Rate = 9%
Nper = 95-65 = 30 periods
PV = $2,951,559.03
FV = $0
Substituting the values in formula:
= pmt(9%,30,-2951559.03,0)
= $287,293.99 Or $287,294
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