Question

You are going to retire in 43 years. After retirement, you need $80,000 at the end of year for 25 years. How much do you have to save for your retirement every month

Answer 1

Results are below.

Step-by-step explanation:

I will assume an interest rate of 8% per year.

First, we need to calculate the amount required at the moment of retirement:

PV= A*{(1/i) - 1/[i*(1 + i)^n]}

PV= 80,000 * {(1/0.08) - 1/[0.08*(1.08^25)]}

PV= $853,982.1

Now, the monthly deposit required:

i= 0.08/12= 0.0067

n= 43*12= 516

FV= {A*[(1+i)^n-1]}/i

A= monthly deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (853,982.1*0.0067) / [(1.0067^516) - 1]

A= $188.43