Easy Liefer plans to retire at the age of 65 and believes he will live to be 90. Easy wants to receive an annual retirement payment of $50,000 at the beginning of each year. He set up a retirement account that is estimated to earn 6 percent annually.
a)How much money must Easy have in the account when he reaches 65 years old?
b)Easy is currently 29 years of age, how much must he invest in the account at the end of each year for the next 36 years to have this amount in his account at age 65?
a) The amount needed would be the present value of payments of $50,000 for 25 years from 65 to 90.
Amount needed = 50,000 X ...
The solution explains how to determine the amount needed on retirement and the annual savings that should be made.