Posted by **Jessie** on Tuesday, January 15, 2013 at 1:20am.

Suppose that you are 25 years old and you have two options to save money for retirement. Plan A allows you to save $3000 per year for the next 20 years, then sit for 20 years and finally draw on it for the following 30

years. Plan B allows you to wait 20 years and save $20,000 per year from ages 46 through 65 before drawing on the money for the following 30 years.

Suppose that you expect your investment to grow at 10% per year until you reach age 65. After age 65, you plan to draw a constant annual income out of your

account such that it is empty after 30 years of retirement. During this 30-year period, you will keep your money in a less risky portfolio that you expect to grow at 6% per

year.

Which plan will leave you wealthier in your retirement, and how much could you afford to draw out each year during retirement under these two plans?

Finally, suppose that the inflation rate is expected to be 2% per year every year until you are 95. In current dollars, how much could you afford to draw out each year during retirement under the two plans above?

## Answer This Question

## Related Questions

- Math - Tuition for one year at a state university is about $13,000. Devon would ...
- Finance - You are now 30 years old. You plan to retire in 30 years, and expect ...
- Finance - Your client is 40 years old and she wants to begin saving for ...
- math - interest rates/annuity - Plan to save $5000 per year for retirement with ...
- business finance - Your client is 40 years old, and she wants to begin saving ...
- Finance - Your client is 40 years old, and she wants to begin saving for ...
- Math: Finance - Need help solving these finance questions? PV = C/r PV= C/r-g P...
- finance - You want to save $1,000,000 for your retirement (under 40 years old) ...
- finance - A 45-year-old woman decides to put funds into a retirement plan. She ...
- BUSINESS FINANCE - John Smith wants $80,000 per year in his retirement. He plans...

More Related Questions