Eve brown is trying to save for her retirement. she believes she can earn 12% on

Question

Eve brown is trying to save for her retirement. she believes she can earn 12% on average each year on her retirement fund. assume that at the beginning of each of the next 40 years, eve will allocate x dollars to her retirement fund. if at the beginning of a year eve has y dollar in her fund, by the end of the year, it will grow to 1.12y dollars.

a. using excel, develop a spreadsheet model to find out how much Eve should allocate to her retirement fund each year to ensure that she will have $1 million at the end of 40 years.

b. are there any key factors that are being ignored in our analysis of amount saved for retirement.

Explanation / Answer

A.) $1,303.63 Type in the following in Excel: =PMT(0.12,40,,-1000000) B.) It ignores risk, inflation (or nominal vs real growth), it also ignores withdrawal limitations that are typical of retirement and pension funds

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