Question

PLEASE HELP Amanda feels like she could live on $75,000 annually forever adjusting for 3% inflation when she retires in 35 years. She realizes that inflation will slowly reduce her buying power over her retirement years. She feels that she will be able to earn 8% on any deposits made up to her retirement and 6% in her account after retirement. How much will Amanda need to save annually over the next 35 years to reach her retirement goal?

Answer 1

Amount required on the day of retirement = Annual amount/(return on iinvestment--inflation rate)

=75,000/(6%-3%)

=$2,500,000

Let amount to be saved each year be X

X*[{(1.08)^35-1}/0.08] = 2,500,000

172.32x = 2,500,000

X =$14,507.89

Hence the amount to be saved each year for 35 years = $14,507.89