After she paid medical and funeral expenses , $ 60,000 of the life insurance proceeds remained . In addition to the life insurance proceeds , Carolyn has $ 37,500 in a savings account , which she had accumulated over the past 10 years . Recognizing that she is within 10 years of retirement , Carolyn wishes to invest her limited resources so she will be able to live comfortably once she retires . Carolyn is quite superstitious . After consulting with a number of psychics and studying her family tree , she is certain she will not live past 80 . She plans to retire at either 62 or 65 , whichever will allow her to meet her long-run financial goals . After talking with a number of knowledgeable individuals — including , of course , the psychics — Carolyn estimates that to live comfortably in retirement , she will need $ 45,000 per year before taxes . This amount will be required annually for 18 years if she retires at 62 or for 15 years if she retires at 65 . As part of her financial plan , Carolyn intends to sell her home at retirement and rent an apartment . She has estimated that she will net $ 112,500 if she sells the house when she is 62 and $ 127,500 if she sells it when she is 65 . Carolyn has no financial dependents and is not concerned about leaving a sizable estate to her heirs . If Carolyn retires at age 62 , she will receive from Social Security and an employer-sponsored pension plan a total of $ 1,359 per month ($ 16,308 annually ); if she waits until age 65 to retire , her total retirement income will be $ 1,688 per month ($ 20,256 annually ). For convenience , Carolyn has already decided to convert all her assets at the time of retirement into a stream of annual income and she will at that time purchase an annuity by paying a single premium . The annuity will have a life just equal to the number of years remaining until her 80th birthday . If Carolyn retires at age 62 and buys an annuity at that time , for each $ 1,000 that she puts into the annuity she will receive an annual benefit equal to $ 79 for the subsequent 18 years . If she waits until age 65 to retire , each $ 1,000 invested in the annuity will produce an annual benefit of $ 89.94 for the 15 years . Carolyn plans to place any funds currently available into a savings account paying 6 % compounded annually until retirement . She does not expect to be able to save or invest any additional funds between now and retirement . For every dollar that Carolyn invests today , she