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Finance (Engineering Economics)

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You wish to retire at 60 and, at the end of each month thereafter for 25 years, to receive $6,000. Assume that you begin making monthly payments into an account at age 23 and continue these payments until age 60. If the annual interest rate is constant at 12 percent, how much must be deposited monthly between ages 23 and 60 for you to receive your $6,000/month for 25 years? Assume monthly compounding throughout.

I am having difficulty with this problem because once you reach the age of 60, the sum of money you have saved between 23 and 60 (whatever amount that is) keeps accruing interest (at 1 % percent a month) while you you withdraw $6000 a month. I don't know how to find the sum of money you need to save between 23 and 60.

  • Finance (Engineering Economics) - ,

    1. calculate the Present worth of those monthly payments of 6K for 25 years. That will be the nest egg you need at age 60.

    2. calculate the future value of the monthly payments beginning at age 23 and ending at age 60 (37 years?).

    Now your question. If you have a nest egg at 60, its future value is automatically calculated as you had figured in 1) above.

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