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Thread: Finance/Retirment plan/TVM problemem

  1. #1
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    Finance/Retirment plan/TVM problemem

    You have clients who are just beginning to think about planning for retirement. They are both 35 years old and have 85,00 in a company retirement plan which they can roll over into their own plan. They want to retire at 67 but re wondering what effect retiring a year or two earlier or later will have on their retirement. Their combined income is 120,000 per year, and they want to finance the same income in retirement. When they retire they can purchase a two-life annuity with an expected second death at age 87.

    Prepare a plan with some alternative rates of return and retirement dates and explain what annual contributions they must make.
    Last edited by hanjy; Dec 7th 2016 at 06:47 PM.
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  2. #2
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    Re: Finance/Retirment plan/TVM problemem

    Hey hanjy.

    Can you show us what you have tried?
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    Re: Finance/Retirment plan/TVM problemem

    Initial investment: 85,000
    Term: 67-35 = 32 years
    Annual rate: 5%
    Required total investment after 32 years: 1,500,000
    I plugged those numbers into financial calculator
    pv= -85,000, n=32, i=5, fv= 1,500,000
    pmt= -14541.79
    What does the 2 life annuity with an expect death at 87 mean? and where do i go from here?
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  4. #4
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    Re: Finance/Retirment plan/TVM problemem

    Do you understand what an annuity is?

    An annuity is when you continually top up an investment that has some interest rate model and a reverse annuity is like a mortgage calculator where you do the reverse to find out how to take the mortgage value [which continually adds interest] back to zero.

    I'd read up on the annuity formula to understand this a bit better and remember the idea of the reverse annuity [like a mortgage payment] against a normal annuity [which is like a savings investment type security].
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    Re: Finance/Retirment plan/TVM problemem

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