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2 Jan 2018

You want to go to Europe 5 years from now, and you can save $3,100 per year, beginning one year from today. You plan to deposit the funds in a mutual fund that you think will return 8.5% per year. Under these conditions, how much would you have just

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Cash Flow Evaluation. You want to retire in 20 years from today and then start making withdrawals from your savings every year, with the first withdrawal coming one-year after retirement (or 21 years from today) for 25 total annual withdrawals (at 21 years through 45 years from now, annually). You want your annual withdrawals to be $75,000 per year. Additionally, you want to take a world tour in 25 years from now when you turn 70, with an additional cost of $35,000 that would occur exactly 25 years from today.

-You assume that you can earn a nominal APR rate of 4%, with monthly compounding, on your savings over the next 45 years.

a) How much money must you have in your retirement savings account at the beginning of your retirement (20 years from now) to fund this future retirement withdrawal stream, assuming that you make no new deposits after retirement.

b) Assume that you want to save up the sum calculated in a) above. If you make monthly deposits into your retirement account, with the first deposit made one-month from today and the last deposit made just as your retire (or 20 years from today for 240 total monthly deposits), then how much must you deposit monthly to fund this retirement? (such that your retirement account will have an approximate balance of zero after the last $60,000 withdrawal at time-45).

Your sister turned 35 today, and she is planning to save $7,000 per year for retirement, with the first deposit to be made one year from today. She will invest in a mutual fund that's expected to provide a return of 7.5% per year. She plans to retire 30 years from today when she turns 65, and she expects to live for 25 years after retirement, to age 90. Under these assumptions, how much can she spend each year after she retires? Her first withdrawal will be made at the end of her first retirement year.

You are 41 years old today and want to plan for retirement at age 65. You want to set aside an equal amount every year from now to retirement. You expect to live to age 87 and want to withdraw a fixed amount each year during retirement that at age 65 will have the same purchasing power as $99,349 has today. You plan on withdrawing the money starting the day you retire. You have not saved any money for retirement. Inflation is assumed to be 4.0% in the future. You expect to earn an 8.5% return on your investments in the future. How much do you need to save each year until retirement to meet your goal?

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