Retirement savings plan

| May 27, 2015

1. You are about to set up a new retirement savings account that earns interest at a 3% annual interest rate (APR). You want to make monthly contributions to that account from now until you retire in 20 yrs. The goal is to save enough money so that you will be able to withdraw the money you need each month without depleting your principal (in reality, you will probably deplete your principal gradually). How much money do you need to contribute to the account each month if you want to withdraw $4000 a month?


  1. Consider the savings plan you developed in the discussion.  How much did you determine you need to save each month?  You do not need to repeat those calculations here, but just re-state your conclusion.
  2. With the 3% account, the monthly payments might be difficult to maintain, so you decide to wait 5 more years until you retire.  What are your monthly payments with this plan?
  3. Suppose you can find an account that earns interest at 4% interest instead.  How does that change your monthly payments?  (You choose how long until you retire in this question.)

Please write out steps taken to get to the solution. Need this as soon as possible. Thanks

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