The maximum annual retirement benefit that Herbert can receive during his retirement years is $6,720.30.
In order to calculate the maximum annual retirement benefit that Herbert can receive during his retirement years, we need to calculate the future value of his annual deposits and the interest earned over the 40-year saving period. Using the formula for compound interest, we can calculate the future value (FV) as:
FV = P(1 + r)^n
Where:
- P is the annual deposit amount ($5,000)
- r is the interest rate (7% or 0.07)
- n is the number of years (40)
After calculating the future value of the annual deposits, we can then calculate the maximum annual retirement benefit by dividing the future value by the number of years of retirement (30). Let's calculate the values:
Future Value (FV) = $5,000(1 + 0.07)^40 = $201,608.88
Maximum Annual Retirement Benefit = FV / Number of Years of Retirement = $201,608.88 / 30 = $6,720.30
Therefore, the maximum annual retirement benefit Herbert can receive during his retirement years is $6,720.30.