If you expect to retire in 30 years, live on $50,000 per year and expect the inflation to average 3% over the next 30 years, what amount of annual income will you need to live at the same comfort level in 30 years?
A) $121,363
B) $$95,000
C) $20,599
D) $51,500

Question

Quizplus · Accepted Answer

To calculate future income, we need to adjust our current income for inflation. Using the rule of 72, we can estimate that the purchasing power of money will decrease by half in approximately 24 years (72 divided by the inflation rate of 3%). Thus, in 30 years, the cost of living will be approximately twice as much as it is today. Therefore, you would need $100,000 per year to maintain the same purchasing power as $50,000 today. Adjusting this amount for inflation, the required annual income in 30 years would be $121,363.

If You Expect to Retire in 30 Years, Live on $50,000