Steve has just been hired and asked to complete his retirement benefits package. His company is willing to meet his contribution every year (e.g. if Steve decides to invest 5% of his salary at the end of every year into his retirement fund, his employer contributes with additional 5%, hence Steve's retirement plan is financed with an annual amount equal to 10% of his salary) and the retirement fund guarantees an annual yield of 7%. For simplicity purposes assume that Steve will have the same annual salary of 94,419 dollars for the next 28 years and then retires (assume that there is nothing else to consider, e.g. taxes). If George's goal is to have $3.5 million upon retirement, which PERCENTAGE of his income should he save every year

The amount of contribution that shall be made to the fund per year in order to have the amount of $ 3,500,000 at the end of the 28 years shall be determined through the future value of annuity formula which shall be calculated as follows:

F=R[((1+i)^n-1)/i]

In the given scenario:

F=amount to be accumulated at the end of 28 years=$ 3,500,000

R=Amount needs to be contributed to fund per year=?

i=interest rate per year=7%

n=number of payments involved in given scenario=28

$3,500,000=R[((1+7%)^28-1)/28%]

R=$43,371.75=Amount needs to be contributed per fund per year

Since the steve has to make only 50% of the contribution to the fund therefore the amount which the steve will need to save from his annual income is given as follows:

Amount needs to be saved by the steve=$43,371.75/2=$21,685.875