Question

Joan wants to start an IRA that will have $860,000 in it when she retires in 29-years. How much should she invest annually in her IRA to do this if the interest is 8% compounded annually?

Answer 1

Annual deposit= $8,271.94

Explanation:

Giving the following information:

Future Value (FV)= $860,000

Number of periods= 29 years

Interest rate= 8% = 0.08

To calculate the annual deposit, we need to use the following formula:

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

A= annual deposit

Isolating A:

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

A= (860,000*0.08) / [(1.08^29) - 1]

A= $8,271.94