Question

You would like to have enough money saved to receive a $50,000 per year in perpetuity after retirement. How much would you need to have saved in your retirement fund to achieve this goal? (Assume that the perpetuity payments start on the day of your retirement. The annual interest rate is 8%.)

Answer 1

$625,000

Step-by-step explanation:

Calculation to determine How much would you need to have saved in your retirement fund to achieve this goal

Using perpetuity equation

PV=C/r

Where,

C=Perpetuity after retirement

r=Annual interest rate

Let plug in the formula

PV = (50,000/0.08)

PV= $625,000

Therefore How much would you need to have saved in your retirement fund to achieve this goal will be $625,000