# Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he...

## Question:

Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until is 85 years old. He wants a fixed retirement income that has the same purchasing power at the time he retires at $40,000 has today. (The real value of his retirement income will decline annually after her retires.) his retirement income will begin the day he retires, 10 years from today, after which time he will receive 24 additional annual payments. Annual inflation is expected to be 4.5%. He currently has $115,000 saved, and he expects to earn 7.2% annually on his savings.

How much must he save during each of the next 10 years (end of year deposits) to meet his retirement goal?

## Real and Nominal Interest rate:

Real interest rate shows the interest rate of an invested that is adjusted by the inflation.In other words, it shows the true rate of loans and bonds.

Nominal interest rate = real interest rate + inflation rate

For example, If the rate of inflation is at 1%, and the real interest rate is 10%, then the nominal interest rate would be 9%.

## Answer and Explanation: 1

Become a Study.com member to unlock this answer! Create your account

View this answerPhase II: Retirement Phase

Considering the inflation rate @4.5% , the expected retirement income at year 1 {eq}= $40,000*1.045^ {10} = $...

See full answer below.

#### Ask a question

Our experts can answer your tough homework and study questions.

Ask a question Ask a question#### Search Answers

#### Learn more about this topic:

from

Chapter 25 / Lesson 5What is real interest rate? Understand the definition of real interest rate. Learn the formula of real interest rate and how to calculate real interest rate.

#### Related to this Question

- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the
- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires until he is 85. He wants a fixed retirement income that has the same purchasing power at the t
- Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $35,000 has today. (the real value of
- Mark's father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires until he is 85. He wants a fixed retirement income that has the same purchasing power at the
- Assume that your father is now 40 years old, that he plans to retire in 20 years, and that he expects to live for 25 years after he retires, that is until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retir
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires, that is, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he reti
- Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the same purchasing power at the time he retires as $35,000
- Assume that your father is now 50 years old, plans to retire in 10 years, and expects to live for 25 years after he retires - that is, until age 85. He wants his first retirement payment to have the s
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires - that is, until he is 85. He wants his first retirement pay
- Assume that your father is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires, that is, until he is 85. He currently earns $40,000 per yea
- John Adams is the CEO of a nursing home in San Jose. He is now 50 years old and plans to retire in 10 years. He expects to live for 25 years after he retires, that is, until he is 85. He wants a fixed retirement income that has the same purchasing power a
- John Adams is the CEO of a nursing home in San Jose. He is now 50 years old and plans to retire in ten years. He expects to live for 25 years after he retires, that is until he is 85. He wants a fixed retirement income that has the same purchasing power a
- Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,000 a year forever, starting when he retires. If he can earn 6.5% annually, how much does your grandfather need to invest to produce the d
- Your father is planning to retire, and his employer has promised him a guaranteed but fixed income of $50,000 per year for the rest of his life. If the rate of inflation is 5% per year, how much in current dollars will the payment at the end of the 20th y
- Your parents have saved $1,235,060 for retirement as of now. They have asked you to help them with their retirement plan. They have been earning an average of 5% annually on their retirement investmen
- Your mother is planning to retire this year. Her firm has offered her a lump-sum retirement payment of $50,000 or a $6,000 lifetime annuity whichever she chooses. Your mother is in reasonably good hea
- Perpetuity: Your grandfather is retiring at the end of next year. He would like to ensure that his heirs receive payments of $10,000 a year forever, starting when he retires. If he can earn 6.5 perce
- Jim's parents will retire in 19 years. They currently have $326 665, and they think they will need $1 282 824 at retirement. Assuming they don't save any additional funds, the annual interest rate the
- Your father is 50 years old now and his plan is to retire exactly at the age of 60. His goal is to create a fund that will allow him to receive Rs15,00,000 at the time of retirement so that he can start a small business. He has searched the market and is
- A man turns 40 today and wishes to provide supplemental retirement income of 3000 at the beginning of each month starting on his 65th birthday. Starting today, he makes monthly contributions of X to a
- A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals: - Years until retirement: 30 -
- You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $80,000 annually on which to live. Your first withdrawal will be made one year after you retire, and you anticipate that your retirement
- You and your wife are making plans for retirement. You plan on living 25 years after you retire and would like to have $100,000 annually on which to live. Your first withdrawal will be made one year after you retire and you anticipate that your retirement
- This is a classic retirement problem. Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $123,000 f
- Ian Krassner wants to save money to meet two objectives. First, he wants to retire 31 years from today with a retirement income of $ 300,000 per year for 20 years. The first retirement payment will oc
- Cindy is 25 years old today and is beginning to plan for her retirement. She wants to set aside an equal amount at the end of each of the next 30 years so that she can retire at age 55. She expects to live to the maximum age of 90 and wants to be able to
- Mr Burns wants to retire at age 100. Once he retires he wants to withdraw $1.2 billion at the beginning of each year for 8 years from an offshore account that will pay 23% annually. In order to fund h
- Your mother is planning to retire this year. Her firm has offered her a lump-sum retirement payment of $50,000 or a $6,000 lifetime annuity whichever she chooses. Your mother is in reasonably good health and expects to live for at least 15 more years. Whi
- Your uncle has $340,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, starting at the end of this year. He also wants to have $25,000 left to give
- Your father's employer was just acquired, and he was given a severance payment of $550,000, which he invested at a 3.5% annual rate. He now plans to retire, and he wants to withdraw $25,000 at the end
- Jim would like to retire in 35 years. Once he retires, he would like to have $120,000 at the end of each year until the day he passes away (30 years after retirement). He believes he can earn a 7% return on his investment. Starting next year, how much mon
- Peter is currently 30 years old and he plans to retire early, in 25 years' time. He would like to have an income of $50,000 per year during his retirement, which he anticipates will last for 30 years. Assume that Peter receives the retirement income at th
- You are 30 years old today. You want to retire at age 60. You want to have $1,500,000 at retirement. Realistically, you know that the most that you can save from your 31st birthday until your 50th is
- Jared is looking forward to graduating with his MBA from OSU. 1. He wants to begin saving for retirement and believes he will need $135,000 during his first year in retirement (he assumes
- Sam is currently 30 years of age. He owns his own business and wants to retire at the age of 60. He has little confidence in the current Social Security system. He wants to retire with an annual incom
- Stan wants to plan for his retirement in 10 years. During his 30 year retirement, he plans to spend $5,000 monthly, while earning 10% his retirement funds. He will save monthly in his 401K retirement fund with his employer over the next 30 years where he
- Stan wants to plan for his retirement in 30 years. During his 30 year retirement, he plans to spend $5,000 monthly, while earning 10% in his retirement funds. He will save monthly in his retirement fund with his employer over the next 30 years where he pl
- Stan wants to plan for his retirement in 30 years. During his 30 year retirement, he plans to spend $5,000 monthly, while earning 10% of his retirement funds. He will save monthly in his 410K retirement fund with his employer over the next 30 years where
- Kenneth wants to buy a $2,100,000 retirement home in Colorado. He wants to know how long it will take him if he invests $945,000 today at 5%.
- EZ Leifer plans to retire at the age of 65 and believes he will live to be 90. EZ wants to receive an annual retirement payment of $ 50,000 at the beginning of each year. He sets up a retirement accou
- Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects to live to the maximum age of 80 and wants to be able to
- Charlie wants to retire in 15 years, and he wants to have an annuity of $50,000 a year for 20 years after retirement. Charlie wants to receive the first annuity payment the day he retires. Using an in
- Daniel will retire on his 60th birthday. He wants to withdraw $40,000 from his retirement account on each birthday from his 71st to his 80th to cover his living expenses. In addition to these annual w
- My dad is getting a pension corpus of 50 Lakh by the end of this year. He plans to keep 15 lakh in Senior citizen savings, 9 L in post office monthly income scheme and the rest in mutual funds. Is it
- A very well organized engineer wants to be a millionaire by her 60th birthday. She believes she can make 15% per annum on her investments.
- Jared is looking forward to graduating with his MBA from OSU. He wants to begin saving for retirement and believes he will need $135,000 during his first year in retirement (he assumes a 2% annual inf
- Claude wishes to save money to provide for his own retirement and for the college education of his son. He will need $25,000 per year for each of four years starting 15 years from now. Claude also wishes to retire 31 years from today, and feels he needs r
- Nadine is retiring at age 62 and expects to live to age 85. On the day she retires, she has $348,219 in her retirement savings account. She is somewhat conservative with her money and expects to earn
- Mr. Moore is 35 years old today and is beginning to plan for his retirement. He wants to set aside an equal amount at the end of each of the next 25 years so that he can retire at age 60. He expects t
- A retirement home in Florida costs $200,000 today. Housing prices in Florida are increasing at a rate of 4% per year. Joe wants to buy the home in 8 years when he retires.
- A woman has an inheritance in a trust fund for family members left by her recently deceased father that will pay $50,000 at the end of each year indefinitely into the future. She has just turned 60 and does not think that this perpetuity-immediate meets h
- Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $134,000 from her savings account on each birthday for 20 years following her retirement; the first w
- Your friend is celebrating his 35th birthday today and wants to start saving for his anticipated retirement at age 65. He wants to be able to withdraw $10,000 from his savings account on each birthday for 10 years following his retirement; the first withd
- Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $134,000 from her savings account on each birthday for 20 years following her retirement; the first wi
- Bob, age 52, has come to you for help in planning his retirement. He works for a bank, where he earns an annual salary of $60,000. Bob would like to retire at age 62.
- Stan wants to plan for his retirement in 10 years During his 30 year retirement, he plans to spend $5,000 monthly, while earning 10% in his retirement funds. He will save monthly in his retirement fund with his employer over the next 30 years where he pla
- The Crusoes family currently has a saving of $1,415,000 and is thinking about retiring in 4 years. The family right now has an after-tax income of $135,000 and has an annual living expense of $100,000. Neither member of the family are eligible for a defin
- Your uncle has $300,000 invested at 7.5%, and he now wants to retire. He wants to withdraw $35,000 at the end of each year, beginning at the end of this year. He also wants to have $25,000 left to give you when he ceases to withdraw funds from the account
- This is a classic retirement problem. A friend is celebrating her birthday and wants to start saving for her anticipated retirement. She has the following years to retirement and retirement spending goals: |Years until retirement: |30 |Amount to withdra
- Your father has worked all of his life for Postie Plus Department Stores. He believes Postie Plus provides superior returns to other investments. Therefore, his entire retirement account is invested i
- John Adams is the CEO of a nursing home in San Jose. He is now 50 years old and plans to retire in ten years. He expects to live for 25 years after he retires?that is, until he is 85. He wants a fixed
- Retirement planning Personal Finance Problem Hal? Thomas, a 25?-year-old college... Retirement planning Personal Finance Problem Hal? Thomas, a 25?-year-old college? graduate, wishes to retire at age 60. To supplement other sources of retirement? income,
- Mr. Smith retires in exactly 20 years. At that time he desires to have accumulated enough money so that he can consume $150,000 per year for perpetuity starting at that time. He, furthermore, wishes to make equal payments to his account each period -- 20
- Ted Gardiner has just turned 30 years old. He has currently accumulated $35,000 toward his planned retirement at age 60. He wants to accumulate enough money over the next 30 years to provide for a 20-year retirement annuity of $100,000 at the beginning of
- Your Grandfather left you an inheritance that will provide an annual income for the next 20 years. You will receive the first payment one year from now in the amount of $16,500. Every year after that,
- Your grandfather left you an inheritance that will provide an annual income for the next 10 years. You will receive the first payment one year from now in the amount of $4,000. Every year after that,
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $31,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he w
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $24,000 per month for 25 years, with the first paymen
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $26,500 per month for 25 years, with the first paymen
- Bill Petty, age 56 has just retired after 31 years of teaching. He is a husband and father of two children who are still dependent. Bill received a $150,000 lump-sum retirement bonus and will also rec
- Your friend wants to prepare for his retirement. He does not want to rely on his children for his retirement expenses which he projects to be P30, 000 per month starting at age 50. He assumes that he will live to a maximum age of 70. He just turned 25 now
- 4. Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $29,500 per month for 20 years, with the first pa
- Preston expects to retire in 40 years at age 65. He is currently putting away 5% of his annual salary in a retirement plan that earns 5% per year. His employer is contributing 2% of his salary. Currently he is making $40,000 per year and he expects it to
- A retirement home in Florida costs $200,000 today. Housing prices in Florida are increasing at a rate of 4% per year. Joe wants to buy the home in 8 years when he retires. Joe has $25,000 right now in
- Nadine is retiring at age 66 and expects to live to age 82. She has $136,000 in her retirement savings account. She is somewhat conservative with her money and expects to earn 6 percent during her ret
- A. Doctor Stephen Strange, MD, wants to allocate $5,000 of this year s wage earnings to save for retirement. He is 40 years old and wants to retire at the age of 65, at which point he will consume his retirement savings. He has seen 14,000,307 possible ou
- Saben is 40 and wants to retire in 20 years. His family has a history of living well into their 90s. Therefore, he would like to plan on living until age 100, just in case. He currently needs $100,000
- Mr. Baker is planning for his retirement. He is planning to work for 100 years (from now). He plans to live forever after he retires, and would like to have an annual payment of pound 100,000, starting 100 years from now (when he retires). How much will M
- Henry Hub has 25 years to retirement and expects to spend a further 20 years in retirement (i.e., years 21-45). He lives an extravagant lifestyle and has drawn up a detailed spreadsheet which suggests
- Justin just turned 40 today and has decided that he will retire at 55. He is divorced and single with one child who is already 21. Based on the planning that he has already done, he expects to have an after-tax income of $50,000 a year in retirement. His
- Nirmal "Nims" Purja just turned 55. Nims is planning to retire in 10 years and currently has $500,000 in his pension fund. Based on the longevity pattern of his family, he assumes she will live 20 years past her retirement age; during each of these years,
- B. Doctor Stephen Strange, MD, wants to allocate $5,000 of this year's wage earnings to save for retirement. He is 40 years old and wants to retire at the age of 65, at which point he will consume his retirement savings. He has seen 14,000,307 possible ou
- C. Doctor Stephen Strange, MD, wants to allocate $5,000 of this year's wage earnings to save for retirement. He is 40 years old and wants to retire at the age of 65, at which point he will consume his retirement savings. He has seen 14,000,307 possible ou
- Hal Thomas, a 25-year-old college graduate, wishes to retire at age 65. To supplement other sources of retirement income, he can deposit $2,000 each year into a tax-deferred individual retirement arra
- "Fred and Louise are 38 years old and plan on retiring at age 67 and expect to live until age 95. Fred currently earns $150,000 and they expect to need $100,000 in retirement. Louise is a stay-at-home mom. They also expect that Social Security will provid
- Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $134,000 from her savings account on each birthday for 20 years following her retirement; the first wit
- Your friend is celebrating her 35th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $140,000 from her savings account on each birthday for 20 years following her retirement; the first wit
- Paul and Lucy Reynolds have determined that they will require annual retirement income equal to $63,000 as based on their current amount of income. They both plan to retire in 8 years and want you to
- Today is Stanley's 55th birthday. He plans to retire on his 65th birthday. He wants to save the same amount each year, starting today and ending on the day he retires. Then, starting on his 66th birth
- A father wants to set up a bank acount that will pay his daughter $18,000 at the end-of-quarter (EOQ) 4 and $32,000 at EOQ 8. He will fund this account by making quarterly payments of $x from the pres
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $26,500 per month for 20 years, with the first payme
- You are trying to decide how much money you will need at retirement. You expect to retire at age 65. You hope to travel extensively while you are healthy enough. To finance your travels (and cover you
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $20,000 per month for 20 years, with the first payment
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with retirement income of $31,500 per month for 25 years, with the first payment
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $26,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he w
- Bilbo Baggins wants to save money to meet three objectives. First, he would like to be able to retire 30 years from now with a retirement income of $27,000 per month for 25 years, with the first payment received 30 years and 1 month from now. Second, he w
- A grandfather sets up a trust for his only grandchild. The trust consists of an annuity that will pay $5,000 monthly to the grandchild for 18 years. The annuity pays an annual return of 5% and makes t
- Mr. Jones is 40 years old. He wants to retire at age 62 with an 80% wage replacement ratio. He currently earns $100,000 and has managed to save $100,000 toward his retirement (including investments and cash equivalents). He is currently saving $5,000 per
- Jack and Jill want to retire when they accumulate 1,500,000 in their individual retirement funds. They figure that they can just live off on the interest after that on perpetuity, no matter how long t
- You are trying to decide how much money you will need at retirement. You expect to retire at age 65. You hope to travel extensively while you are healthy enough. To finance your travels (and cover yo