Assume that individual has accumulated $125,000 in a retirement fund as of today. They want to save
Question:
Assume that individual has accumulated $125,000 in a retirement fund as of today. They want to save enough additional funds to be able to withdraw $50,000 per year (in today's purchasing power) for 30 years of possible retirement. The fund they invest in (their current investment fund) is expected to earn a 6% real AR during their savings years. Assume that the individual is 25 years from retirement. At retirement the individual is going to switch the retirement funds into a less risky investment earning 3.5% AR.
Find the level of the annual additional savings (in current dollars) that will be required to meet their expected retirement income goal.
Personal Financial Planning
ISBN: 9780357438480
15th Edition
Authors: Randy Billingsley, Lawrence J. Gitman, Michael D. Joehnk