According to financial planners, the average retiree requires approximately 70% of their last year’s working salary ($241,345.13) each year to live comfortably in retirement. Assume that you want to earn a fixed amount of interest each year in retirement. Your goal is to spend only the interest and still live comfortably. And, you want to earn the interest forever so that what remains can be passed onto your children, donated your favorite charity, or donated in honor of your favorite finance professor. That is, you want to earn a fixed amount, each year, for an indefinite amount of time.
a. If you retire at 60 and can earn a 5% return, how much must you have saved to earn the required amount of interest?
b. If you die when you are 90 years old, how much money will be left to bequeath?