Assume your goal in life is to retire with one million dollars.How much would you need to save at the end of each year if investment rates average 9% and you have a 15-year work life?

Question

Quizplus · Accepted Answer

To solve this, we use the future value of an annuity formula: $FV = P \times \left( \frac{(1 + r)^n - 1}{r} \right)$, where $FV$ is the future value ($1,000,000), $P$ is the annual payment, $r$ is the annual interest rate (9% or 0.09), and $n$ is the number of periods (15 years). Rearranging the formula to solve for $P$, we get $P = \frac{FV}{\left( \frac{(1 + r)^n - 1}{r} \right)}$. Plugging in the values, $P = \frac{1,000,000}{\left( \frac{(1 + 0.09)^{15} - 1}{0.09} \right)}$, which calculates to approximately $34,059.

Assume Your Goal in Life Is to Retire with One