You decide that you want to save 2,448,378 dollars for retirement. Assuming that

Question

You decide that you want to save 2,448,378 dollars for retirement. Assuming that you are 25 years old will retire at the age of 65 and can earn a 9 percent annual interest rate on your deposits, how much deposit each year to meet your retirement goal? (your first deposit will be one year from now and your last deposit will be 40 years from today, i.e. 40 deposits) Hint : The number of years for FVIFA computation 40 years You believe that you will need 92,078 dollars a year for 10 years in retirement. If you are 20 today how must you save each year to meet your retirement goal

Explanation / Answer

Retirement benefits = 2,448,378

Number of years required = 65-25 = 40 years

Annual interest rate on deposits = 9%

The future value factor at 9% for 40 years is 31.409

The annual deposit to be made is as follows:

=2,448,378/31.409

=77,951

Thus, the annual deposit to be made is $77,951.

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