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Assume your goal is to retire at age 65 and you estimate you will live until...

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Finance

Assume your goal is to retire at age 65 and you estimate youwill live until age 90. Your income at age 30 is $50,000 and youexpect this to increase at a rate of 8% per year. The nominal rateof return on your investment portfolio is 6% and you plan to save15% of your income per year. The expected rate of inflation is 3%.How much will your fund pay per year during your retirement? Iwould like to see it worked out so I can understand it.

Answer & Explanation Solved by verified expert
3.9 Ratings (697 Votes)
First lets compute future value of savings using formula for FV of growing annuity FVGA P x 1r n 1g nrg P First payment 50000 x 015 7500 r Rate per period nominal rate    See Answer
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Transcribed Image Text

Assume your goal is to retire at age 65 and you estimate youwill live until age 90. Your income at age 30 is $50,000 and youexpect this to increase at a rate of 8% per year. The nominal rateof return on your investment portfolio is 6% and you plan to save15% of your income per year. The expected rate of inflation is 3%.How much will your fund pay per year during your retirement? Iwould like to see it worked out so I can understand it.

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