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5-39 My father is 50 years old, and he plans to retire in 10 ...

Customer Question
My father is 50 years old, and he plans to retire in 10 years. He expects to live for
25 years after he retires (until he's 85). He wants a fixed retirement income that
has the same purchasing power at the time he retires as $40,000 has today. His
retirement income will begin the day he retires, 10 years from today, and he will
then get 24 additional annual payments. Inflation is expected to be 5 percent per
year from today forward; he currently has 100,000 saved up. He expects to earn a
return on his savings of 8 percent per year, annual compounding. To the nearest
dollar, how much must he save during each of the next ten years (with deposits
made at the end of each year) to meet his retirement goal?

The first part is accumulated phase - you only add to saving and spend from other
sources. The second phase - there will nt be any additional to saving - only interest
and spending.
Spending is inflation adjusted (based on 5% inflation).
Additional also inflation adjusted - you would need to save $49,925 annualy in this
year and it will be $77,450 in ten years from now.
You will have ~$1,100,000 at the time of retirement. The maximum saving will be
$1,222,519 in 19 years and will start to go down because of spending increase
(inflation adjusted). So far by the time your father plan to die his estate will be
$54.

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