Chapter 2. Retirement problem - A Pension ProblemComplicating the Future-Value Problem A typical exercise is the following You are currently 55 years

Chapter 2. Retirement problem - A Pension...

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A Pension Problem—Complicating the A Pension Problem—Complicating the Future-Value Problem Future-Value Problem
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A typical exercise is the following: You are currently 55 years old and intend to retire at age 60 . To make your retirement easier, you intend to start a retirement account. At the beginning of each of years 1, 2, 3, 4 (that is, starting today and at the beginning of each of the next four years), you intend to make a deposit into the retirement account. You think that the account will earn 8 percent per year. After retirement at age 60, you anticipate living eight more years. At the beginning of each of these years you want to withdraw $30,000 from your retirement account. Your account balances will continue to earn 8 percent.
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How much should you deposit annually in the account ?? The following spreadsheet fragment shows how easily you can go wrong in this kind of problem—in this case, you’ve calculated that in order to provide $30,000 per year for eight years, you need to contribute $240,000/5 = $48,000 in each of the first five years. As
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