• I want to be able to have $50,000 a year during retirement. I want to make sure that I can have it until I am 100 years old. I plan to retire at 65. I can earn 5%. How much do I need to have at retirement to be able to make it?
$4,516,015.37
To determine how much you need to have at retirement in order to sustain $50,000 a year until the age of 100, you can follow these steps:
Step 1: Calculate the number of years you need to plan for retirement. If you plan to retire at 65 and live until 100, you need to plan for 35 years of retirement.
Step 2: Determine the annual income you require during retirement. In this case, you want to have $50,000 per year.
Step 3: Decide on the interest rate you can earn on your retirement savings. For this scenario, you mention 5%.
Step 4: Use the formula for the future value of an annuity to calculate the amount you need at retirement:
Future Value (FV) = Annual Income / (Interest Rate * (1 - (1 + Interest Rate)^-Number of Years))
Substituting the values into the formula, we get:
FV = $50,000 / (0.05 * (1 - (1 + 0.05)^-35))
Now let's solve this equation step by step:
Step 5: Calculate the exponential part of the formula: (1 + 0.05)^-35 ≈ 0.395784.
Step 6: Calculate the denominator: 0.05 * (1 - 0.395784) ≈ 0.0350578.
Step 7: Calculate the final result by dividing the annual income by the denominator:
FV = $50,000 / 0.0350578 ≈ $1,425,076.
So, in order to have $50,000 a year until the age of 100, with a 5% interest rate and retirement starting at 65, you would need to have approximately $1,425,076 saved up by the time you retire.