- You Are Planning For A Very Early Retirement You Would Like To Retire At Age 40 And Have Enough Money Saved To Be Able 1 (122.85 KiB) Viewed 35 times
You are planning for a very early retirement. You would like to retire at age 40 and have enough money saved to be able to draw $220,000 per year for the next 30 years (based on family history, you think you'll live to age retirement by making 10 equal annual installments (from age 30 to age 40) into a fairly risky investment fund that you expect will earn 14% per year. You will leave the money in this fund until it is completely depleted when (Click the icon to view the present value annuity table.) (Click the icon to view the future value annuity table.) (Click the icon to view the present value table.) (Click the icon to view the future value table.) To make your plan work answer the following questions: i (Click the icon to view the questions.) C 2. How does this amount compare to the total amount you will draw out of the investment during retirement? How can these numbers be so different? Over the course of your retirement you will be withdrawing However, by age 40 you only need to have invested These numbers are different because: O A. You need to have far more accumulated than what you will withdraw because you will withdraw large portion of the investment every year the balance remains invested where it continues to earn 14% interest. O B. You need to have the same accumulated as you will withdraw because you will not earn further interest on your investment when you reach retirement. O C. You need to have far less accumulated than what you will withdraw because you only withdraw a portion of the investment every year the balance remains invested where continues to earn 14% interest. O D. None of the above. 3. How much must you pay into the investment each year for the first ten years? (Hint: Your answer from Requirement 1 becomes the future value of this annuity.) (Round your answer to the nearest whole dollar.) For the first ten years, the amount you must pay into the investment each year is 4. How does the total out-of-pocket savings compare to the investment's value at the end of the 10-year savings period and the withdrawals you will make during retirement? (Use the investment rounded to the nearest wh calculated above, then round your final answer to the nearest whole dollar.) The total out-of-pocket savings amounts to This is far than the investment's worth at the end of ten years and remarkably than the amount of money you will eventually withdraw from the investment.
e.) bu w raw at y will t yo ar fo e inv the Reference Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 20 Period 25 Period 30 Period 40 - X Present Value of Annuity of $1 20% 0.990 0.833 1.970 1.528 1% 2% 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 1.942 1.913 1.886 1.859 1.833 1.783 1.736 1.690 1.647 1.605 1.566 2.884 2.829 2.775 2.723 2.673 2.577 2.487 2.402 2.322 2.246 2.174 3.902 3.808 3.717 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 4.853 4.713 4.580 4.452 4.329 4.212 3.993 3.791 3.605 3.433 3.274 3.127 2.941 2.106 2.589 2.991 5.601 5.417 5.242 3.326 5.795 6.728 7.652 6.472 6.230 6.002 3.605 5.076 4.917 5.786 5.582 6.210 6.802 4.623 4.355 4.111 3.889 3.685 3.498 5.206 4.868 4.564 4.288 4.039 3.812 5.747 5.335 4.968 4.639 4.344 4.078 6.247 5.759 5.328 4.946 4.607 4.303 7.325 7.020 6.733 6.463 3.837 8.566 8.162 7.786 7.435 7.108 4.031 9.471 8.983 8.530 8.111 7.722 7.360 6.710 6.145 5.650 5.216 4.833 4.494 4.192 10.368 11.255 12.134 13.004 13.865 18.046 22.023 25.808 32.835 9.787 9.253 8.760 8.306 7.887 10.575 9.954 9.385 8.863 8.384 11.348 10.635 9.986 9.394 8.853 12.106 11.296 10.563 9.899 9.295 12.849 11.938 11.118 10.380 9.712 7.139 6.495 5.938 5.453 5.029 4.656 4.327 7.536 6.814 6.194 5.660 5.197 4.793 4.439 7.904 7.103 6.424 5.842 5.342 4.910 4.533 8.244 7.367 6.628 6.002 5.468 5.008 4.611 8.559 7.606 6.811 6.142 5.575 5.092 4.675 16.351 14.877 13.590 12.462 11.470 9.818 8.514 7.469 6.623 5.929 5.353 4.870 19.523 17.413 15.622 14.094 12.783 10.675 9.077 7.843 6.873 6.097 5.467 4.948 22.396 19.600 17.292 15.372 13.765 11.258 9.427 8.055 7.003 6.177 5.517 4.979 27.355 23.115 19.793 17.159 15.046 11.925 9.779 8.244 7.105 6.233 5.548 4.997 until it is it continu ntinues to the neare estment r
ke to retire at age 40 and have enough money saved to be able to draw $220,000 per year for the next 30 years (based on family histo age until e.) Reference Present Value of $1 Periods 1% 2% Period 1 0.990 Period 2 3% 4% 5% 6% 8% 10% 12% 14% 16% 18% 20% 0.980 0.971 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.961 0.943 0.925 0.907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.942 0.915 0.889 0.864 0.840 0.794 0.751 0.712 0.579 0.924 0.888 0.855 0.823 0.792 0.735 0.683 0.636 0.482 0.951 0.906 0.863 0.822 0.784 0.747 0.681 0.621 0.567 0.519 0.476 0.437 0.980 0.971 0.961 Period 3 0.675 0.641 0.609 Period 4 0.592 0.552 0.516 uw Period 5 0.402 aw Period 6 0.942 0.888 0.837 0.790 0.746 0.705 0.630 Period 7 0.933 0.871 0.813 0.760 0.711 0.665 0.583 Period 8 0.923 0.853 0.789 0.731 0.677 0.627 0.540 Period 9 0.914 0.837 0.766 0.703 0.645 0.592 0.500 Period 10 0.744 0.676 0.614 0.558 0.463 0.564 0.507 0.456 0.410 0.370 0.335 0.513 0.452 0.400 0.354 0.314 0.279 0.467 0.404 0.351 0.305 0.266 0.233 0.424 0.361 0.308 0.263 0.225 0.194 0.386 0.322 0.270 0.227 0.191 0.162 0.905 0.820 Period 11 at y Period 12 will Period 13 0.237 0.195 0.162 0.135 0.208 0.168 0.137 0.112 0.182 0.145 0.116 0.093 0.160 0.125 0.099 0.078 0.140 0.108 0.084 0.065 Period 14 yo Period 15 0.896 0.804 0.722 0.650 0.585 0.527 0.429 0.350 0.287 0.887 0.788 0.701 0.625 0.557 0.497 0.397 0.319 0.257 0.879 0.773 0.681 0.601 0.530 0.469 0.368 0.290 0.229 0.870 0.758 0.661 0.577 0.505 0.442 0.340 0.263 0.205 0.861 0.743 0.642 0.555 0.481 0.417 0.315 0.239 0.183 0.673 0.554 0.456 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.026 0.610 0.478 0.375 0.295 0.233 0.146 0.092 0.059 0.038 0.024 0.016 0.010 0.552 0.412 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 0.453 0.307 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 Period 20 0.820 0.780 Period 25 r fo Period 30 0.742 Period 40 0.672 inv it co ntinue the r
Reference Periods Period 1 Period 2 Period 3 Period 4 Period 5 Period 6 Period 7 Period 8 Period 9 Period 10 Period 11 Period 12 Period 13 Period 14 Period 15 Period 20 Period 25 Period 30 Period 40 Future Value of $1 1% 18% 20% 2% 3% 4% 5% 1.020 1.030 1.040 1.050 1.010 6% 8% 10% 12% 14% 1.060 1.080 1.100 1.120 1.140 1.020 1.040 1.061 1.082 1.103 1.124 1.166 1.210 1.254 1.300 1.191 1.260 1.331 1.405 1.482 16% 1.160 1.180 1.200 1.346 1.392 1.440 1.643 1.728 1.939 2.074 1.262 1.360 1.464 1.338 1.611 1.469 2.288 2.488 1.062 1.126 1.194 1.265 1.419 2.195 2.436 2.700 1.030 1.061 1.093 1.125 1.158 1.041 1.082 1.126 1.170 1.216 1.051 1.104 1.159 1.217 1.276 1.340 1.149 1.230 1.316 1.407 1.504 1.083 1.172 1.267 1.369 1.477 1.594 1.094 1.195 1.305 1.423 1.551 1.689 1.105 1.219 1.344 1.480 1.629 1.791 2.986 1.587 1.772 1.974 1.714 1.949 2.211 1.072 2.502 2.826 3.185 3.583 2.144 2.476 4.300 1.851 1.999 2.159 2.358 2.773 3.759 4.435 5.160 5.234 6.192 7.430 2.853 3.278 3.252 3.803 2.594 3.106 3.707 4.411 2.853 3.479 4.226 5.117 6.176 3.138 3.896 4.818 5.936 7.288 3.452 4.363 5.492 6.886 8.599 10.699 3.797 4.887 6.261 7.988 10.147 12.839 4.177 5.474 7.138 9.266 11.974 15.407 1.116 1.243 1.384 1.539 1.710 1.898 2.332 1.127 1.268 1.426 1.601 1.796 2.012 2.518 1.138 1.294 1.469 1.665 1.886 2.133 2.720 1.149 1.319 1.513 1.732 1.980 2.261 2.937 1.346 1.558 1.801 2.079 2.397 3.172 2.191 2.653 3.207 4.661 6.727 9.646 13.743 19.461 27.393 38.338 2.666 3.386 4.292 6.848 10.835 17.000 26.462 40.874 62.669 95.396 5.743 10.063 17.449 29.960 50.950 85.850 143.371 237.376 10.286 21.725 45.259 93.051 188.884 378.721 750.378 1,469.772 8.916 1.161 1.220 1.486 1.806 1.282 1.641 2.094 1.348 1.811 2.427 3.243 4.322 1.489 2.208 3.262 4.801 7.040 1.561 1.574 1.689 1.811 1.762 1.925 2.100 ontinues to ea es to earn 149 hearest whole