Miguel, a recent 22-year old college graduate, wants to retire a millionaire. How much will he need to set aside annually to a

Question

3 years ago

5

chieve his goal, assuming he plans to retire at 65 and he can earn a 10% annual return on his investment?

1 answer:

olga55 [171] · Answer 1 · 2022-04-02T20:45:38+03:00

Answer

Miguel must set aside $62,745 annually

Explanation

N = Number of years till Miguel would retire = 43 years

FV = Future Value = $1,000,000

r = Interest rate = 10%

PMT = Annual payments (at the ending of the year) = ?? The question asks us to calculate this

We would use the future value ordinary annuity formula to calculate PMT

FV = PMT $[\frac{(1+r )^{N} -1}{r} ]$

1000000 = PMT $[\frac{(1+0.10 )^{10} -1}{0.10} ]$

PMT ≅ $62,745

Miguel must set aside $62,745 annually

Miguel, a recent​ 22-year old college​ graduate, wants to retire a millionaire. How much will he need to set aside annually to a