Caroline has just turned 22 and has begun her rst job. Her rst years salary is $60,000
Question:
Caroline has just turned 22 and has begun her first job. Her first year’s salary is $60,000 per year, which is paid monthly ($5,000 per month). For planning purposes:
(1) Her future annual salary will grow at a rate of 4% per year.
(2) She will work for 40 years and retire on her 62nd birthday.
(3) She will receive a pension payment each year for 30 years beginning on her 62nd birthday.
(4) Accounting for inflation, her first pension payment should be $150,000.
(5) Her pension payments should increase at a rate of 2.5% per year.
(6) She has decided to withdraw 100p% from her monthly paycheck.
(7) She wants to use a 6% EAR as an appropriate interest rate.
What is the minimum value for p (to the nearest whole percent) to fund Caroline’s plan? Ignore taxes for this analysis.
Personal Finance Turning Money into Wealth
ISBN: 978-0133856439
7th edition
Authors: Arthur J. Keown