If you can earn 4 percent, how much will you have to save each year if you want to retire in 35 years with 1 million

Question

If you can earn 4 percent, how much will you have to save each year if you want to retire in 35 years with 1 million

Answer 1

Hi Tiffany,

 

the formula for future value of an annuity is

 

FV = P(((1+i)ⁿ -1)/i)

 

where

 

FV = future value

P = annual payment

i = interest rate

n = number of periods

 

in our problem

 

FV = 1,000,000

p = value to find

i = .04

n = 35

 

1000000= P(((1+.04)³⁵ -1)/.04)

 

1000000 = P * 73.6522

 

P = 13,577.32

 

Hope this helps