has determined he will have an annual retirement income deficit. The deficit for the first year of retirement, 10 years from now, is $90,000. He expects to be in retirement for 30 years, and believes he can earn a 7% after-tax annual return on invested dollars. Inflation is expected to average 4% annually over this same period. What is the amount of lump-sum retirement funds needed by Jason at the beginning of retirement to fund his additional retirement income needs?

Question

Gerald Knapp

Business

11 October, 06:57

has determined he will have an annual retirement income deficit. The deficit for the first year of retirement, 10 years from now, is $90,000. He expects to be in retirement for 30 years, and believes he can earn a 7% after-tax annual return on invested dollars. Inflation is expected to average 4% annually over this same period. What is the amount of lump-sum retirement funds needed by Jason at the beginning of retirement to fund his additional retirement income needs?

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Answers (1)

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Danielle Santiago · Answer 1

Total needed = $2,700,000

Explanation:

Giving the following information:

The deficit for the first year of retirement, 10 years from now, is $90,000. He expects to be in retirement for 30 years and believes he can earn a 7% after-tax annual return on invested dollars. Inflation is expected to average 4% annually over this same period.

Real rate = 7 - 4 = 3%

Total needed = 90,000*30 = 2,700,000