Question: Sof i a is 55 years old. She has 3 children, Meg age 3, Jo age 6 and Amy age 9 . However, she is
Sofia is 55 years old. She has 3 children, Meg age 3, Jo age 6 and Amy age 9. However, she is already planning for retirement. She plans on retiring in 10 years when she will be 65 years old. Sofiabelieves she will live until she is 105.
In order to live comfortably, she thinks she will need to withdraw $12,000 every month during retirement. These monthly withdrawals will be made at the beginning of each month during retirement. Also, Sofia has pledged to donate $1,200 a week to her favorite charity during her retirement. The payments will be made at the end of each week. The last payment will be made when she dies. In addition, she would like to establish a scholarship at Ryerson. The first payment from scholarship would be $40,000. The first scholarship payment would be made 10 years after she retires. Thereafter scholarship payments will be made every year. To keep pace with inflation, Sofia would like the amount of scholarship payments to increase by 3% each year. She wants the payments to continue after her death, therefore the payments will go on forever. During retirement, Sofia expects to earn 4% per year compounded annually. Sofia also wishes to give each of children $500,000 when they reach the age of 30.
She currently has $150,000 in a locked-in investment that earns 8% interest per year compounded monthly. Sofia currently contributes $2,000 every month to an investment account. These contributions are made at the end of each month and will continue until she retires at 65. Sofia expects to earn 6% per year compounded annually on her monthly contributions to her retirement account.
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