Question

A couple will retire in 50 years; they plan to spend about $26,000 a year in retirement, which should last about 25 years. They believe that they can earn 9% interest on retirement savings. a. If they make annual payments into a savings plan, how much will they need to save each year? Assume the first payment comes in 1 year. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Monthly payment= $797.464

Step-by-step explanation:

Giving the following information:

A couple will retire in 50 years.

They plan to spend about $26,000 a year in retirement, which should last about 25 years.

They believe that they can earn 9% interest on retirement savings

n= 50

i= 0.09

FV= (26000*25)=650000

We need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

We need to isolate A (monthly pay):

A= (FV*i)/[(1+i)^n-1]

A= (650000*0.09)/(1.09^50-1)

A= 58500/73.35752008

A= $797.464