Retirement Account
Not what you're looking for?
Today is Archie's 50th birthday and his retirement account totals $237,000. He plans to retire in 12 years and is confident that his nest egg will earn 8% annually between now and that time. When he retires, Archie wants to purchase a 20-year annuity from the Gold Star Insurance Company. The annuity carries an interest rate of 6% per year. Archie thinks he will need payments of $80,000 per year to sustain his life style. He is concerned that his current nest egg will not be sufficient to purchase an annuity that will pay $80,000 per year and he wonders if he must save additional money over the next 12 years to achieve his goal and he has come to you for help.
a. Does Archie have a shortfall?
b. If he has a shortfall, how much is it?
c. If he has a shortfall how much additional money must Archie save each year for the next 12 years at 8% interest in order to have enough money to purchase an annuity that will produce payments of $80,000 per year for 20 years?
Purchase this Solution
Solution Summary
The solution explains how to calculate the future value of savings and match with the requirment of retirement. If there is shortfall, the calculation of the additional savings to meet the shortfall
Solution Preview
Please see the attached file
Today is Archie's 50th birthday and his retirement account totals $237,000. He plans to
retire in 12 years and is confident that his nest egg will earn 8% annually between now
and that time. When he retires, Archie wants to purchase a 20-year annuity from the
Gold Star Insurance Company. The annuity carries an interest rate of 6% per year.
Archie thinks he will need payments of $80,000 per year to sustain his life style. He is ...
Purchase this Solution
Free BrainMass Quizzes
Basics of corporate finance
These questions will test you on your knowledge of finance.
Organizational Leadership Quiz
This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.
Accounting: Statement of Cash flows
This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.
SWOT
This quiz will test your understanding of the SWOT analysis, including terms, concepts, uses, advantages, and process.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.