Assume that you will work for 40 years, and be retired for 25 years. The first retirement
Question:
Assume that you will work for 40 years, and be retired for 25 years. The first retirement withdrawal will be at the end of year 41. Deposits will be made at the end of each year from years 1-40. Withdrawals need to increase at the rate of inflation.
1) - Determine the annual deposit required for years 1-40 if each deposit is the same.
2) - Determine the annual deposit required for years 1-40 if the amount deposited each year will increase at the same rate as the increase in salary.
Given information,
Current Salary = 100,000
Desired Salary = 90,000
Salary Growth Rate = 4% (or) 0.04
Inflation 1 - 25 years = 5%
Inflation 26 - 41 years = 4%
Inflation 42 - 65 years = 3%
Interest Rates While Working:
1 - 25 years = 9.5%
26 - 40 years = 8.5%
Interest Rates While Retired:
1 - 15 years = 8%
16 - 25 years = 6%
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill