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Assume that you will work for 40 years, and be retired for 25 years. The...

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Accounting

Assume that you will work for 40 years, and be retired for 25 years. The first retirement withdrawal will be at the end of year 41. Deposits will be made at the end of each year from years 1-40. Withdrawals need to increase at the rate of inflation.

1) - Determine the annual deposit required for years 1-40 if each deposit is the same.

2) - Determine the annual deposit required for years 1-40 if the amount deposited each year will increase at the same rate as the increase in salary.

Given information,

Current Salary = 100,000

Desired Salary = 90,000

Salary Growth Rate = 4% (or) 0.04

Inflation 1 - 25 years = 5%

Inflation 26 - 41 years = 4%

Inflation 42 - 65 years = 3%

Interest Rates While Working:

1 - 25 years = 9.5%

26 - 40 years = 8.5%

Interest Rates While Retired:

1 - 15 years = 8%

16 - 25 years = 6%

Answer & Explanation Solved by verified expert
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