Step $3$: Practice: Future Value of an Annuity

Now it's time for you to practice what you've learned.

Suppose that Sam is $45$ years old and has no retirement savings. He wants to begin saving for retirement, with the first payment coming one year from now. He can save $$25,000$ per year and will invest that amount in the stock market, where it is expected to yield an average annual return of $8\mathrm{.}00\%$ return. Assume that this rate will be constant for the rest of his's life.

Sam would like to calculate how much money he will have at age $65.$

Using a financial calculator yields a future value of this ordinary annuity to be approximately $$1,144,049\mathrm{.}11$grad at age $65.$

Sam would now like to calculate how much money he will have at age $70.$

Using a financial calculator yields a future value of this ordinary annuity to be approximately at age $70.$

Sam expects to live for another $25$ years if he retires at age $65,$ with the same expected percent return on investments in the stock market.

Using a financial calculator, you can calculate that Sam can withdraw at the end of each year after retirement $($assuming retirement at age $65),$ assuming a fixed withdrawal each year and $$0$ remaining at the end of his life.

Sam expects to live for another $20$ years if he retires at age $70,$ with the same expected percent return on investments in the stock market.

Using a financial calculator, you can calculate that Sam can withdraw at the end of each year after retirement at age $70,$ assuming a fixed withdrawal each year and $$0$ remaining at the end of his life.