Question

How much must you deposit each year into your retirement account starting now and continuing through year 12 if you want to be able to withdraw $70,000 per year forever, beginning 35 years from now? Assume the account earns interest at 10% per year.

Answer 1

$2,583

Step-by-step explanation:

The required value of your account at year 35 is:

$70,000 / 0.1 = $700,000

FV = $700,000. This is the required amount you need to have in your account 35 years from now

i/r = 10%. The interest that the account pays

n = 35 years

PV = 0

PMT (The amount of annual deposit required to achieve the target above. This is the missing value we need to calculate)

By using financial calculator, we obtain:

PMT = $2,583