Question

Your sister turned 30 today, and she is planning to save $3,000 per year for retirement, with the first deposit to be made one year from today. she will invest in a mutual fund, which she expects to provide a return of 10% per year. she plans to retire 35 years from today, when she turns 65, and she expects to live for 30 years after retirement, to age 95. under these assumptions, how much can she spend in each year after she retires? her first withdrawal will be made at the end of her first retirement year

Answer 1

The future value of her investment will be
.. 3000*(1.1^35 -1)/(1.1 -1) ≈ 813,073.11

That supports 30 years of annual payments of
.. 813,073.11*(.1)/(1 -1.1^-30) = 86,250.18

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The compound interest and annuity formulas in your text are applicable.