Question

Angela is 22 years old and would like to retire at the age of 62 with $1,000,000 in her retirement account. Assuming a 6% return, how much does Angela need to put away on a monthly basis to ensure her retirement goal of $1,000,000? Assume those monthly payments are made at the end of the month. You must show your work!

Answer #1

Solution:

Angela would start the saving when she is 22 and this will continue till when she is 62. Means that the time = 40 years = 40 *12 = 480 months

Annual return = 6% , Monthly return = 6%/12 = 0.5%

Future value = $1,000,000

Future value of annuity formula can be used to find the monthly saving to reach the retirement goal

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