Question

You believe you will spend $47,000 a year for 13 years once you retire in 26 years. If the interest rate is 7% per year, how much must you save each year until retirement to meet your retirement goal? (Do not round intermediate calculations. Round your answer to 2 decimal places.) g

Answer 1

Annual deposit= $8,896.79

Step-by-step explanation:

Giving the following information:

You believe you will spend $47,000 a year for 13 years once you retire in 26 years.

The interest rate is 7% per year.

First, we need to calculate the total amount required:

FV= 47,000*13= $611,000

Now, using the following formula, we can determine the annual deposit:

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

A= annual deposit

Isolating A:

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

A= (611,000*0.07) / [(1.07^26) - 1]

A= $8,896.79