Use the “Calculators” link at the top of the page to perform the following calculations.
a. How much would you have to save annually to accumulate $500,000 for retirement? Assume that you will save an equal annual amount over 30 years and that your savings will earn 6 percent interest. Further assume that your interest income is taxable each year at a rate of 25 percent. See “How Much Should I Save to Reach my Goal?” and input the above data.
b. If you have accumulated $250,000 for retirement and plan to withdraw $3,000 per month, how long will your money last? Assume your savings will earn 4 percent interest and investment income is taxable at a rate of 25 percent. See “How Long Will my Money Last?” and input the above data.
c. Annuities provide tax-deferred savings, while most other savings options result in currently taxable investment income. Does this tax treatment really make a difference over time? Go to “What are the Tax Advantages of an Annuity?” Assume no initial balance, $5,000 saved annually, 8 percent interest, and a 25 percent tax rate before and after retirement. You may want to view the graph and data table.