A client just turned 75 and plans to retire in 10 years on his 85th birthday. She
Question:
A client just turned 75 and plans to retire in 10 years on his 85th birthday. She is saving money today for her retirement and is setting up a retirement account with her office. She wants to withdraw money from her retirement account on her birthday every year until she dies. Ideally, you would like to withdraw $50,000 from your 85th birthday and increase your withdrawals by 10% a year until your 89th birthday (i.e. $73,205 on your 89th birthday). She plans to die on her 90th birthday, at which point she would like to leave $200,000 to her descendants. Your client currently has $100,000. You estimate that retirement account money will earn 8% annually for the next 15 years. Your client plans to contribute an equal amount of money each year until their retirement. His first contribution will come in a year, his tenth and last contribution will come in ten years (on his 85th birthday). How much should you contribute each year to meet your goals?
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt, Eugene F. Brigham