Mary's 25th birthday is today, and she hopes to retire on her 65th birthday. She has determined that she will need to have $3,000,000 in her retirement savings account in order to live comfortably. Mary currently has no retirement savings, and her investments will earn 4% annually.

a. How much must she deposit into her account at the end of each of the next 40 years to meet her retirement savings goal?

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Business

Nash Bray

2 March, 19:51

Mary's 25th birthday is today, and she hopes to retire on her 65th birthday. She has determined that she will need to have $3,000,000 in her retirement savings account in order to live comfortably. Mary currently has no retirement savings, and her investments will earn 4% annually.

a. How much must she deposit into her account at the end of each of the next 40 years to meet her retirement savings goal?

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Answers (1)

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Jocelyn Mcgrath · Answer 1

Annual deposit = $31,570.47

Explanation:

Giving the following information:

She has determined that she will need to have $3,000,000 in her retirement savings account.

Her investments will earn 4% annually.

To calculate the annual deposit we need to use the following formula:

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

A = annual deposit

Isolating A:

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

A = (3,000,000*0.04) / [ (1.04^40) - 1] = $31,570.47