You have 35 years left until retirement and want to retire with $2.2 million. Yo

Question

You have 35 years left until retirement and want to retire with $2.2 million. Your salary is paid annually, and you will receive $72,000 at the end of the current year. Your salary will increase at 2 percent per year, and you can earn a return of 8 percent on the money you invest.

If you save a constant percentage of your salary, what percentage of your salary must you save each year? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

Percentage of Salary =

You have 35 years left until retirement and want to retire with $2.2 million. Your salary is paid annually, and you will receive $72,000 at the end of the current year. Your salary will increase at 2 percent per year, and you can earn a return of 8 percent on the money you invest.

Explanation / Answer

Annual savings *FVAF@8%,35 = Future value

     S * 172.32 = 2200000

     s = 2200000/ 172.32

          = 12766.95

% Of salary savings = 12766.95 /72000 = .1773 or 17.73%

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