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    Your client just turned 75 years old and plans on retiring in exactly 10 years (on her 85th birthday). She is saving money today for her retirement and is establishing a retirement account with your office. She would like to withdraw money from her retirement account on her birthday each year until her death. She would ideally like to withdraw $50,000 on her 85th birthday and increase her withdrawals by 10% a year through her 89th birthday (she would like to withdraw $73,205 on her 89th birthday). She is planning anticipating that she will die on her 90th birthday, at which time she would like to leave $200,000 to her children. Your client currently has $100,000. You estimate that the money in the retirement account will earn 8% a year over the next 15 years.

    Your client plans to contribute an equal amount of money each year until her retirement. Her first contribution will come in exactly 1 year; her 10th and final contribution will come in 10 years (on her 85th birthday). How much should she contribute each year to meet her objectives?
    possible answers:
    a)12,998.63 b)13,243.18 c)13,759.44
    d)14,021.53 e)11,943.34 f)11,532,65
    g)11,004.59 h)10,187.45 i)11,875.34

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    Solution Summary

    Calculates annuity for the retirement account.