Approximately how much must be saved for retirement in order to withdraw $100,000 per year for the next 25 years if the balance earns 8 percent annually, and the first payment occurs one year from now?
A)$1,067,000
B)$1,250,000
C)$2,315,000
D)$2,500,000 PV = $100,000
= $100,000 x (12.5 -1.8252)

Question

Quizplus · Accepted Answer

The present value of an annuity formula is used to calculate how much needs to be saved. The formula is PV = PMT x [(1 - (1 + r)^-n) / r], where PMT is the annual withdrawal, r is the interest rate, and n is the number of years. Plugging in the values: PV = $100,000 x [(1 - (1 + 0.08)^-25) / 0.08] gives approximately $1,067,000.

Approximately How Much Must Be Saved for Retirement in Order