How much must you deposit each year into your retirement account starting now and continuing through year 12 if you want to be able to withdraw $70,000 per year forever, beginning 31 years from now? Assume the account earns interest at 10% per year. The amount to be deposited is determined to be: $?

$32,734

Explanation:

The required value of your account at year 12 is:

$70,000 / 0.1 = $700,000

FV = $700,000. This is the required amount you need to have in your account 12 years from now

i/r = 10%. The interest that the account pays

n = 12 years

PV = 0

PMT (The amount of annual deposit required to achieve the target above. This is the missing value we need to calculate)

By using financial calculator, we obtain:

PMT = $32,734

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