You are 60 years old

You are 60 years old - $172,427.68 that he will have total...

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You are 60 years old. Currently, you have $10,000 invested in an IRA and have just received a lump-sum distribution of $50,000 from a pension plan, which you roll over into an IRA. You continue to make $2,000 annual payments to the regular IRA and expect to earn 9% on those funds until you start withdrawing the money at age 70 (ie after 10 years). The IRA rollover will earn 9% for the same duration. a) How much will you have when you start to make withdrawls at age 70? Future value (at age 70) = ($50,000 + $10,000)1.09 10 + ($2,000 / 0.09 x 1.09 10 - 1) = $60,000 x 1.09 10 = $60,000 x 2.3674 = $142,044 + $22,222.22 x 1.3674 = $142,044 + $30,386.67 = 172.430.67
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Unformatted text preview: $172,427.68 that he will have total at age 70 b) If your funds continue to earn 9% annually and you withdraw $17,000 annually, how long will it take to exhaust your funds? Total PV of money withdrawn in the future. Present value at age 70 answer in (a) $172,427.68 = ($17, 000 / 0.09) (1 1 / 1.09 n ) = N = 28 years c) If your funds continue to earn 9% annually and your life expectancy is 18 years, what is the maximum you may withdraw each year? A = money withdrawn each year $172,427.68 = (A / 0.09) (1 1 / 1.09 18 ) A = $19,693.36 is the max that can be withdraw each year...
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This note was uploaded on 04/01/2012 for the course FINC 354 taught by Professor Gibbons-cobb during the Spring '12 term at Columbia College.

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