Chapter 5, Solutions Cornett, Adair, and Nofsinger
Retirement Income Calculators
The Internet provides some excellent retirement income calculators. You can find one by Googling “retirement income calculator.” Many of the calculators allow you to determine your predicted annual income from a retirement nest egg under different assumptions. For example, you can spend only the investment income generated from the nest egg. Most retirees try not to touch the principal. Or, you can spend both the income and the nest egg itself. These calculators let you input the size of the retirement wealth and the investment return to be earned. They then make time value computations to determine the annual income the nest egg will provide.
Go to a retirement income calculator like the one at MSN Money. Use the calculator to create a retirement scenario. Use the TVM equations or a financial calculator to check the Internet results.
SOLUTION: Assuming the principal amount is exhausted and the amount of savings at my retirement at age 65, here is what the calculator gives.
Given a certain amount of savings, how much can I spend annually during retirement?
Your annual income is estimated to be $70,000.