A $2000 monthly payment for 28 years with a 5.8% interest rate, you need around $34,482.76 in your retirement account upon retirement.
To calculate the amount of money you need in your retirement account, we can use the present value formula for an annuity. Here's how to do it:
1. Define the variables:
* Monthly payment: $2000
* Retirement years: 40 years
* Payment duration: 28 years * 12 months/year = 336 months
* Interest rate: 5.8% per year = 0.058 per month
2. Calculate the present value:
The present value (PV) is the amount of money you need to deposit now to generate a constant stream of payments (the annuity) in the future. The formula for a present value of an annuity is:
PV = Payment / (Interest rate * (1 - (1 + Interest rate)^(-Payment duration)))
3. Plug in the values and calculate:
PV = $2000 / (0.058 * (1 - (1 + 0.058)^(-336)))
PV ≈ $34482.76
Therefore, you need approximately $34482.76 in your retirement account upon retirement to generate $2000 per month for 28 years, assuming a 5.8% annual interest rate.