If you can earn 4 percent, how much will you have to save each year if you want to retire in 35 years with $ 1 million?
To determine how much you need to save each year to retire with $1 million in 35 years, you can use the concept of future value of money.
The formula to calculate the future value (FV) of an investment with regular contributions is:
FV = P * (1 + r)^n - 1 / r
Where:
FV is the desired future value ($1 million)
P is the annual savings (unknown)
r is the interest rate in decimal form (0.04 for 4%)
n is the number of years (35)
Now, we can rearrange the formula to solve for P:
P = FV * r / (1 + r)^n - 1
Plugging in the values gives us:
P = 1,000,000 * 0.04 / (1 + 0.04)^35 - 1
P ≈ $7,103.50
Therefore, you would need to save approximately $7,103.50 each year to retire with $1 million in 35 years, assuming a 4% interest rate.