My spouse and I are each 55 and hope to retire in 10 years. After retirement, we will receive $8,100 per month after taxes from our employers’ pension plans and $2,100 per month after taxes from Social Security. Unfortunately, our monthly living expenses are $15,600. Our social obligations preclude further economies.

We have $1,500,000 invested in a high-grade, tax-free municipal-bond mutual fund. The return on the fund is 5.0% per year. This fund is our only savings. We plan to make annual withdrawals from the mutual fund to cover the difference between our pension and Social Security income and our living expenses. How much money will we have saved by the age of 65 (in 10 years from now)?

You can assume that the withdrawals (one per year) will sit in a checking account (no interest) until spent. The couple will use the account to cover the monthly shortfalls.

Question:

How much money will we have saved by the age of 65 (in 10 years from now)?

Answer rating: 100% (QA)

To calculate the amount of money you will have saved by the age of 65 we need to consider the follow... View the full answer