A worker aged 40 wishes to accumulate a fund for retirement

A worker aged 40 wishes to accumulate a fund for retirement by depositing $3,000 at the beginning of each year for 25 years. Starting age 65, the worker plans to make 15 annual withdrawals at the beginning of each year. Assuming that all payments are certain to be made, find the amount of each withdrawal starting age 65 if the effective interest rate is 8% during the first 25 years but only 7% thereafter.

Solution

Value after 25 years will be Computing future value using Financial calculator PMT -3000 N= 25 PV= 0 I/Y 8.00% Press CPT and FV FV= $236,863.25 Annual payment made every year Computing PMT using Financial calculator PV= -$236,863.25 N= 15 I/Y= 7.00% FV= 0 Press CPT and PMT PMT= $24,304.96