You are planning to retire after working for another 30 years. You believe that you can save 4% of your salary annually. Your last salary, which has just been paid, was $45,000. You anticipate that your salary will increase at the rate of 5% for the remainder of your working life. The savings will be placed in investments earning an average return of 9% per year. After retiring you expect to live on your savings for 20 years.
a. If you plan to withdraw an equal amount of money every year in retirement, how much will you be able to withdraw from your account every year?
b. Suppose that, to keep up with the rate of inflation, you want your retirement withdrawals to increase by 3% every year, how much will you withdraw in your last year of retirement?
c. Suppose that you want to withdraw an equal amount every year but you want to withdraw 5% more than your answer to (a.)
d. You plan to finance this increase by increasing your savings by $Y a year for the last 4 years of your working life. What is $Y?
(Manually Calculate)