You have 35 years left until retirement and want to retire with $3.1 million. Yo

Question

You have 35 years left until retirement and want to retire with $3.1 million. Your salary is paid annually, and you will receive $42,000 at the end of the current year. Your salary will increase at 4.0 percent per year, and you can earn a 12.0 percent return on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year?

You have 35 years left until retirement and want to retire with $3.1 million. Your salary is paid annually, and you will receive $42,000 at the end of the current year. Your salary will increase at 4.0 percent per year, and you can earn a 12.0 percent return on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year?

Explanation / Answer

let % of salary saved = x

3100000/1.12^35 = x*420*(1-(1.04/1.12)^35)/(0.12-0.04)

x = 12.08%

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