4. It is estimated that you pay $2,000 per year into the Social Security System (FICA) over your 40-year work span. For simplicity, assume that your annuity of $2,000 per year, starting with your 26th birthday and continuing through your 65th birthday. The deposit is done at the end of the year. However, the government decides to provide you the annual withdrawal only after the end of 67th birthday. If the government interest rate is 6% per year, what equal annual withdrawal you can do, if you expect to live till the end of 86th birthday
first we must determine the future value of your social security contributions:
when you are 65, your contributions will be worth = $2,000 x 154.762 (FV annuity factor, 6%, 40 periods) = $309,524
now we must determine the value of the contributions when you are 67:
FV = $309,524 x (1 + 6%)² = $347,781.17
you expect to live 20 more years, so we need to determine the annuity payment:
annuity payment = principal / PV annuity factor, 6%, 20 periods = $347,781.17 / 11.470 = $30,320.94
being born in poverty would limit the people's chances, opportunities and benefits.
this happen because of several things, such as:
- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.
- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.
- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.