I am 53 years old I want to retire at age 70 I am setting up

I am 53 years old. I want to retire at age 70. I am setting up a new retirement saving account that earns interest at a 3% annual interest rate (APR). I want to make monthly contributions to the account from now until I retire. The goal is to save enough money so that I will be able to withdraw money each month without depleting by principal, ( in reality I will probably deplete my principal gradually). At my retirement age I will withdraw $1500.00 a month. Let assume I will live until I\'m 90

1. How much money do I need to contribute to the account each month?

Solution

Let us assume he will live till age of 80 years

The present value of money he consumes assuming 1500 per month from age of 70 to 80 is :

use pv formuale here
=pv(rate,nper,pmt,fv,type)
rate=4%/12=0.25%
nper=10*12=120
pmt=1500
type=0
=PV(4%/12,120,1500,,0)=$148,155.26

use pmt formuale and asuume the FV values as above
=pmt(rate,nper,pv,fv,type)
=PMT(4%/12,(17*12),,148155.26,0)
=$508.26