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% annually, and the first payment occurs 1 year from now?

$1,067,477.62

Explanation:

A fix Payment for a specified period of time is called annuity. The discounting of these payment on a specified rate is known as present value of annuity.

Formula for Present value of annuity is as follow

PV of annuity = P x [ ( 1- ( 1+ r )^-n ) / r ]

PV of annuity = $100,000 x [ ( 1- ( 1+ 8% )^-5 ) / 8% ]

PV of annuity = $1,067,477.62

According to my calculations, in order to be able to withdraw $100,000 from an annuity earning 8% at the end of each of the next 25 years, the amount you would need to deposit now would be $1,067,477.62.

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