Question

You and your wife are making plans for retirement. You plan on living 30 years after you retire and would like to have $75,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement account will earn 10% annually.What amount do you need in your retirement account the day you retire? Round your answer to the nearest cent.

Answer 1

Answer:

The amount needed in the retirement account is $707,025.

Explanation:

This problem is a case of annuity.

They plan to withdraw $ 75,000 annually from the end of the first year of retirement.

The formula that relates capital in the account to annual withdrawals is

$C=A*D=A*(\frac{(1+i)^{n} -1}{i*(1+i)^{n}} )\\\\C=75,000*9.427=707,025$