Question

You have 37 years left until retirement and want to retire with $3.4 million. Your salary is paid annually, and you will receive $48,000 at the end of the current year. Your salary will increase at 4.1 percent per year, and you can earn a 12.1 percent return on the money you invest. If you save a constant percentage of your salary, what percentage of your salary must you save each year?

Answer 1

Answer:

The required savings % to achieve a Future Value of $3.4 million i s 8.55%

By the 37th Year, he would have saved $338,349 which would have accumulated to $3.4 million on the basis of a 12% compounded interest rate yearly.

Explanation:

Using compounded interest rate; A= P(1 + r/n)^nt

A = Final Amount

P = Invested Amount

r= annualized interest rate

n = number of times interest is applied by time period

t = period investment is held for

Considering that our Invested Amount (P) is shifting every new Year, I have applied in tabular form the future value of each Years investment using the above formular.

And by having a uniform savings % reinvested back into the Pool, at the end of the 37th year our investment valuation ends at $3.4M

The breakdown is found in the attached document.