You’re planning for retirement, which you want to do in 30 years. By that time, you expect to need $3000 per month, for 20 years. You find a long-term retirement account promising a fixed 7.8% APR compounded monthly, both during the saving period, and after beginning withdrawals. (You can’t begin withdrawing money from it prior to 30 years without penalty.)
A. To have enough to fund your withdrawals, how much will you have need to save by then?
B. In order to accumulate enough to retire, you begin monthly deposits into the account now. How much will you need to set aside each month to reach your retirement goal?
C. How much interest will have been earned overall, after the last withdrawal is made?
D. Assuming the same annual rate of inflation of 2.45% over the next 30 years, how much would that $3000 be worth in today’s money (i.e. what would the purchasing power be during the first year of retirement)?