You have determined that you will need to accumulate $1,000,000 in your retirement account in order to cover your inflation-adjusted shortfall.Which of the following is closest to the amount of money you would need to put into a tax-deferred retirement account every year if you plan on retiring in 40 years? Assume an 8% average return on this account,and that it is empty today.

Question

Quizplus · Accepted Answer

Using the future value formula, we can calculate the amount needed to be contributed annually as follows:
FV = PV*(1+r)^n
$1,000,000 = Contribution*(1+0.08)^40
Contribution = $3,860. Therefore, the best choice is B, which is closest to $3,860.

You Have Determined That You Will Need to Accumulate $1,000,000