Your current income is $50,000 per year,and you would like to maintain your current standard of living (i.e.,your purchasing power)when you retire.If you expect to retire in 30 years and expect 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 maintain the same purchasing power in 30 years, you need to adjust your current income for inflation. The formula to calculate the inflation-adjusted income is:

Inflation-adjusted income = Current income x (1 + inflation rate)^number of years

In this case, the inflation-adjusted income you need in 30 years is:

Inflation-adjusted income = $50,000 x (1 + 0.03)^30 = $121,363

Therefore, the best choice is A) $121,363.

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