Question Retirement Saving for Jenny
Jenny is considering opening an IRA in preparation for her retirement. She plans to save $
per year with the first investment made one year from now. Her retirement account earns per
year on her investments and she plans to retire in years, immediately after making the last
$ investment.
a How much will she have in her retirement account on the day of her retirement?
b If she hopes to live for years in retirement, how much can she withdraw every year in
retirement starting one year after retirement so that she will just exhaust her savings with
the withdrawal? Assume that her savings will continue to earn in retirement.
c If instead, she decides to withdraw $ per year in retirement again with the first
withdrawal one year after retiring how many years will it take until she exhausts her savings?
Assume that her savings will continue to earn in retirement.
d If she hopes to retire having $ saved in her retirement account, what is the
minimum annual return that her retirement account must earn for the next years? Assume
that she keeps saving $ per year with the first investment made one year from now.
