You are planning your retirement and you conclude that you need to have saved $1, 250.000 in 30...

Question:

You are planning your retirement and you conclude that you need to have saved $1, 250.000 in 30 years. You can invest in a retirement account that guarantees you a 5% annual return.

How much do you have to put into your account at the end of each year to reach your retirement goal?

Retirement Plan:

A retirement plan will help a person to prepare a financial planning in securing future wealth after retirement. With that being said, a retirement plan will guide that person in selecting relevant securities and assets for investment from now to the retirement.

Answer and Explanation: 1

Given information:

  • FV = $1,250,000
  • I = 5%
  • N = 30

Estimate the annual deposit:

{eq}FV = \displaystyle PMT\times\frac{(1+I)^N -1}{I} {/eq}

{eq}\$1,250,000 = \displaystyle PMT\times\frac{(1+5\%)^{30} -1}{5\%} {/eq}

{eq}PMT = $18,814.29 {/eq}


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What is Annuity? - Definition & Formula

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Chapter 2 / Lesson 7
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Learn about annuities. Understand what an annuity is, examine the annuity formula and learn how to calculate its future value, and see examples of annuities.


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