Question

You want to retire after 18 years. At Which time you want to have accumulated enough money to an annuity of $14000 a year for 20 years of retirement. During the period before retirement you will earn 11% annually, while after retirement you can 8% on your money. What Annual contribution to the retirement fund will allow you to receive the $14000 annually.

Can anyone solve this problem??
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Answer 1

Answer:

You would need to save approx. 51.3% of your annual income to get sufficient money to receive $14000 annually post-retirement.

Explanation:

Your total retirement fund at start of retirement (R) = 20 x $14000 = $280000

Your required yearly contribution to achieve this goal (C) = $280000/11 = approx. $15556

Your annual income (I) = 11% of R = ($280000/100) x 11 = $2800 x 11 = $30800

The portion of your annual income needed for contribution ($P_c$) = $\frac{1}{I/C} = approx. \frac{1}{1.95}$

Percentage value of $P_c$ = 1 x 51.3/1.95 x 51.3 = approx. 51.3/100 = 51.3%