Your father, who is 60, plans to retire in 2 years, and he expects to live independently for 3 years. Suppose your father wants to have real income of $40,000 in today's dollars in each year after he retires. His retirement income will start the day he retires, 2 years from today, and he will receive a total of 3 retirement payments.
Inflation is expected to be constant at 5%. Your father has $100,000 in savings now, and he can earn 8% on savings now and in the future. How much must he save each year, starting today, to meet his retirement goals?