Assume you are planning on your retirement today, you decide to invest part of your salary every month in your retirement account. Suppose you will retire when you are 67 years old, your life expectancy is 87 if you are male and 90 if you are female and the inflation rate will be 2.5% a year. For your retirement account the rate of return is 6.5% a year before you retire and after retirement, you will invest more conservatively and the rate of return will be 4.5% a year. To figure out how much you need to save in your retirement account a month before you retire, you ask yourself the following questions
1. Tell us you age today
2. You believe you will live comfortable today with $2,000 a month, how much do you need a month after you retire at 67? Assuming you will need the same amount during the retirement period
3. How much do you need when you are at 67 so you can withdraw the amount we discussed in the question 2 until the last day of your life?
4. Suppose your salary will increase 3% a year and your saving will also increase 3% a year, tell us how much do you need to save in the first month so you will have the same amount we calculated in question 3. (Hint suppose your saving will be increasing .5% a month)
5. Redo question 4 if you will start to save 10 years, instead of today, how much do you need to save in the first month?
Assume you are planning on your retirement today, you decide to invest part of your salary every month in your retirement account. Suppose you will retire when you are 67 years old, your life expectancy is 87 if you are male and 90 if you are female and the inflation rate will be 2.5% a year. For your retirement account the rate of return is 6.5% a year before you retire and after retirement, you will invest more conservatively and the rate of return will be 4.5% a year. To figure out how much you need to save in your retirement account a month before you retire, you ask yourself the following questions
1. Tell us you age today
2. You believe you will live comfortable today with $2,000 a month, how much do you need a month after you retire at 67? Assuming you will need the same amount during the retirement period
3. How much do you need when you are at 67 so you can withdraw the amount we discussed in the question 2 until the last day of your life?
4. Suppose your salary will increase 3% a year and your saving will also increase 3% a year, tell us how much do you need to save in the first month so you will have the same amount we calculated in question 3. (Hint suppose your saving will be increasing .5% a month)
5. Redo question 4 if you will start to save 10 years, instead of today, how much do you need to save in the first month?
