You are 30 years old and plan to retire at age 60. Your goal is to create a fund that will allow you to receive $100,000 per year for 25 years after the retirement. You know that you will be able to earn an average of 8% per year for all your accounts. If you make annual payments into a retirement account, how much will you need to save each year?
This question can be divided into two parts. For the first part you need to know how much money the person should have when he retires in order to give himself 100,000 per year for 25 years at 8%.
The solution explores future value and present value problem described below and provides an excellent answer to the question.