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Saving for a Retirement Plan

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A relative of yours is going to retire in 20 years. At that point, they will want to have enough savings to receive $40,000 per year for 25 years. If they can get a guaranteed interest rate of 7%, how much will they have to set aside each year to meet their goal?

Setting this problem up correctly is critical!

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Solution Summary

Solution discusses the amount to be set aside each year to meet their goal

$2.19
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NPV and annuities: how much must be saved to plan for retirement

Assume that you are planning on how much you need to save for retirement. You expect to live for 30 years in retirement and would like to spend $100,000 (in real terms) per year, while leaving a $1,000,000 bequest to the International Red Cross. You are 35 years away from retirement. How much do you need to save at the end of each year if you earn 5% real (i.e., after inflation) during your working years and 3% during your retirement years?

** Solve the problem in 2 different ways: by using a spreadsheet; by using the formulas for the present value of an annuity and for a loan payment.**

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