Question

Savings, but you do have $20,000 saved; and you plan to contribute $25,000 per year (at the end

You'd like to retire with $2.5 million in 45 years. You are just getting started with your retirement of each year) to your account.
What rate of return do you need to earn on your account to reach your goal?

Answer 1

To reach your retirement goal of $2.5 million in 45 years, you will need to earn a certain rate of return on your account. By using the formula for compound interest, you can calculate the rate of return needed based on the given information.

Step-by-step explanation:

To calculate the rate of return you need to earn on your account to reach your goal, you can use the formula for compound interest:

Final Amount = Principal imes (1 + Rate)^n

Let's break down the information given:

• Principal (P) = $20,000
• Annual Contribution (C) = $25,000
• Time Period (n) = 45 years
• Final Amount (A) = $2,500,000

Using the formula, we want to solve for the Rate (r):

$2,500,000 = ($20,000 + $25,000) imes (1 + r)^{45}

By rearranging the equation and solving for r, we can determine the rate of return needed to reach your goal.