Example 11: Ellen just turned 35 years old and she is planning for retirement by saving some money every year. She will save $10,000 in a year. She will be able to increase her savings by 5% per year. With this plan, if she earns 10% per year on her savings, how much will Ellen have saved at age 65?

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Business

Amber Lawson

18 May, 13:04

Example 11: Ellen just turned 35 years old and she is planning for retirement by saving some money every year. She will save $10,000 in a year. She will be able to increase her savings by 5% per year. With this plan, if she earns 10% per year on her savings, how much will Ellen have saved at age 65?

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Final value = $4,347,451.46

Explanation:

Giving the following information:

She will save $10,000 in a year. She will be able to increase her savings by 5% per year. With this plan, she earns 10% per year on her savings.

To calculate the final value, we need to use the following formula:

FV = {A*[ (1+i) ^n-1]}/i

A = annual deposit = 10,000

i = 0.10 + 0.05 = 0.15

n = 65-35 = 30

FV = {10,000*[ (1.15^30) - 1]} / 0.15 = $4,347,451.46