Mr. Wise is retiring in 25 years. He would like to accumulate $1,000,000 for his retirement fund by then. He plans make equal monthly payments to achieve his goal.
If the rate of return on the retirement fund is 12% (APR), what will his monthly payments be?
Retirement planning requires savings over the working life of the individual. The planning needs to take into account the amount that has to be saved and the rate of return achievable for the given period.
Answer and Explanation: 1
The monthly payments in savings form have to be at least $532.24
We need to use future annuity value formula for this:
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fromChapter 21 / Lesson 15
An annuity is a type of savings account that pays back the investor in the future. Learn the formula used to calculate an annuity's value, and understand the importance of labeling specific numbers to calculate an output over time.