Question

Matt is now 30 and he works hard towards his retirement goal -- becoming a millionaire. He can save 20,000 dollars at the end of each year from his job and he could generate about 6% return from investing in stocks. At what age can he realize his dream?

Answer 1

He can achieve his dream of becoming a millionaire when he is 53.79 years OR 53 years, 9 months and 2 weeks old. (approx)

Time taken for his investment to be $ 1,000,000 = 23.79 years (working note)

Present Age = 30 years (given)

age at which he can realize his dream = 30 + 23.79 years = 53.79 years

Working Notes:

(using excel)

A	B	C
PARTICULARS	in formulae	VALUES
ANNUAL CASH FLOWS	PMT*	-20,000
RATE OF INTEREST P.A.	RATE	0.06
FUTURE VALUE ( $ 1 MILLION)	FV	1,000,000
NPER ( NUMBER OF YEARS)		23.7913220918837
FORMULAE USED		"=NPER(C3,C2,0,C4,0)"
		"=NPER(RATE,PMT,PV,FV,TYPE)"
*PMT used in formulae should be negative as it is an outflow
**PV ( Present Value is taken 'zero' as there is no opening amount )
***TYPE is taken '0' as amount is deposited at the end of each period.