Question

Take control of your life. How much do you need to save for retirement at age 67 today on a monthly basis. If you started 10 years ago, how much would you have had to save on a monthly basis?

How many years until you retire?

How many months until you retire?

Assume you will earn 6% return on your savings.

Assume you will need $500,000 to retire.

How much do you need to save monthly to reach this goal?

How much monthly savings would you need if you started 10 years ago?

i = 6%, $500,000 = FV, N = number of years to retirement, PMT is the savings needed for the year. To arrive at the monthly amount, divide the annual amount by 12.

Answer 1

Number of years = Number of years until you retire = 35
Number of months = 35*12 = 420
Rate per month = 6%/12 = 0.5%
FV = 500000
Per Month payment = FV/(1-(1+r)^-n)/r = 500000/(1-(1+0.5%)^-420)/0.5% = 350.95

If Started 10 years earlier
Number of months = 45*12 = 540
Rate per month = 6%/12 = 0.5%
FV = 500000
Per Month payment = FV/(1-(1+r)^-n)/r = 500000/(1-(1+0.5%)^-540)/0.5% = 181.42

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