Assume that you have 40 years until retirement and have just started your first

Question

Assume that you have 40 years until retirement and have just started your first job. Once you retire, you anticipate that you will live for 30 additional years. Assume that you will require $100,000 per year to support yourself in retirement. All investments that you make will go into and stay in an account that returns 6% per year (i.e. however much you have at retirement will sit in that account and continue to accrue interest on the remaining balance.) How much will you have to save each year over the next 40 years to meet your goal? Assume that your first investment occurs at the end of your first year of work (yr 1) and that the last of your 40 investments occurs on the last day that you are employed (yr 40). For simplicity, assume that your first withdrawal is at the end of your first retirement year (yr 41).

Explanation / Answer

Amount required per year =$ 100000 for 30 Years

Intrest on Ivestment =6%

Years to Retirement =40

so the amount to invest right now wuold be =

formula to know the amount to invest right know= PVAn=R(PVIFAi,n)

here R=is the periodic receipts($ 100000) i= rate of intrest (6%) n= no of years (30 years)

100000(2.643) =264300

so the amount to save=$ 264300

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