You are advising a couple who is 45 years of age and plans to retire in 25 years at the age of 70. Upon retirement, they want to be able to receive $250,000 at the end of each year for a total of 20 years. (So their first retirement be at age 71 and their last payment will be at age 90). Currently they have a total of $50,000 in a savings account. No taxes will be paid on that amount.

You would like to figure out how much this couple must save at the end of each year, starting at the end of this year (the first year), for the next 25 years, so that they have enough money to achieve their retirement goal. Assume the interest rate is 10% and will remain the same over the entire period.

Required

What is the present value 25 years from now (when the couple retires at age 70) of the $250,000 yearly payments received during retirement?

What is the present value today of the value you found in the previous question ($250,000 yearly payments received during retirement)?

Based on your previous answers, what is the required amount to save each year for the next 25 years so that the couple has enough money to achieve their retirement goal?

Answer rating: 100% (QA)

To calculate the present value of the 250000 yearly payments received during retirement we need to c... View the full answer