If you can earn 5%, how much will you have to save each year if you want to retire in 35 years with $1 million?
Are you even looking at my previous replies to you?
The method I used in the previous question applies to this one.
Let me know what you think.
but they are not the same thing is asking for. Some question are based on future value and some on present value. the formyla cannot be the same.
There are two main formulas
amount = presentvalue( 1+i)^n
or for an annuity:
amount = payment( (1+i)^n - 1)/i
for this one, let the payment be p
p( 1.05)^35 - 1)/.05 = 1000000
p = 1000000/90.320307..
p = $ 11071.70
about 11 thousand a year.
thank you. that helped in understanding. :)
To determine how much you need to save each year to reach your retirement goal of $1 million in 35 years, we can use the concept of compound interest. Compound interest is calculated by multiplying the initial amount by the interest rate and adding any additional contributions made over time.
Here's how you can calculate the annual savings needed:
1. Determine the future value (FV) of your savings goal. In this case, it is $1 million.
2. Determine the number of years (N) until retirement. In this case, it is 35 years.
3. Determine the interest rate (R) you will earn on your investments. In this case, it is 5%.
Now, we can use the formula for compound interest to calculate the annual savings needed (P):
FV = P * [(1 + R)^N - 1] / R
Substituting the given values:
$1,000,000 = P * [(1 + 0.05)^35 - 1] / 0.05
To isolate P, we can multiply both sides of the equation by 0.05:
$1,000,000 * 0.05 = P * [(1 + 0.05)^35 - 1]
$50,000 = P * [(1.05)^35 - 1]
Next, we calculate (1.05)^35 - 1:
(1.05)^35 - 1 ≈ 2.808
Now we can substitute this value back into the equation:
$50,000 = P * 2.808
Finally, to find P, we divide both sides of the equation by 2.808:
P ≈ $50,000 / 2.808
P ≈ $17,808.07
Therefore, to retire in 35 years with $1 million, you would need to save approximately $17,808.07 per year.