Math question

Question

Suppose you want to have enough money in the bank 35 years from now (when you retire) so that the interest on the account would be enough to live on each year from then on. If you'll need $75,000 yearly to live on, how much will need to be sitting in your bank account when you start retirement? Assume an average APR of 5.0%. How much would you need to save each month to have this much saved in 35 years?
 

1)Savings when you start retirement: ??????(Round to the nearest dollar and do not use commas.)
 
 
2)Monthly Payment: ??????(Round to the nearest dollar and do not use commas.)

Answer 1

5% M = 75000        .05 x M = 75000         .05M/.05 = 75000/.05          M =$1500000

 

 

12 months x 35 years = 420 months               $1,500,000/ 420 months =$3571.428571 = $3571

 

Is the bank giving you 5% on the money you save each year?    If so, then the answer would be smaller.  

 

Is the money you save being compounded monthly, quarterly, etc.......?????  

 

This is not stated in the problem.  Sometimes books or on line programs do make mistakes in their

 

wording of problems!