Question

Jack and Jill want to be able to spend $200.000 a year after they retire in 30 years. They want the retirement money to be available for 35 years. They think the retirement account can earn about 5% annual interest on all depeosits. About how much should Jack and Jill fund their retirement account each year while they are working?

a) $48,219.34
b) $49,478.17
c) $48.732.09
d) $49.291.02
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Answer 1

To calculate how much Jack and Jill should fund their retirement account each year, use the formula for the future value of an annuity with the given values. The result is approximately $48,219.34 per year.

Step-by-step explanation:

To calculate how much Jack and Jill should fund their retirement account each year, we can use the formula for the future value of an annuity:

Future Value = P * (1 + r)^(n-1) * (1 + r) / r

In this case, P is the annual funding amount, r is the annual interest rate (5%), and n is the number of years the retirement money needs to last (35 years). We need to solve for P, so we can rearrange the formula as:

P = (Future Value * r) / [(1 + r)^(n-1) * (1 + r)]

Now we can plug in the values and calculate:

P = (200,000 * 0.05) / [(1 + 0.05)^(35-1) * (1 + 0.05)]

P ≈ 48,219.34

Therefore, Jack and Jill should fund their retirement account approximately $48,219.34 each year while they are working.