Question

You believe you will need to have saved $500,000 by the time you retire in 46 years in order to live comfortably. You also believe that you will inherit $10,000 in 10 years. If the interest rate is 6% per year, how much must you save each year to meet your retirement goal?

Answer 1

You have to accumulate $500,000 in 46 years for a comfortable life.

You will inherit $10,000 in 10 years. Deposit that $10,000 at the rate of 6% for next 36 years. It will become $81,472.52 (Formula=(10000*(1+6%)^36))

Now, the actual money you have to accumulate is $500,000-$81,472.52=$418,527.48

To accumulate $418,527.48 in 46 years, you have do yearly deposits. This can be calculated by using PMT function in EXCEL

PMT(rate,nper,pv,fv,type)

PMT(6%,46,0,418,527.48,0)

$1,847.74

You have to invest $1,847.74 every year.