I am 30 years old and I want to retire at 65 with 2 million dollars. T

QUESTION

I am 30 years old and I want to retire at 65 with 2 million dollars. The interest rate on my savings account is 5%.How much do I need to set aside each year to make sure I have 2 million dollars by age 65.
According to the given problem,Future value = $2,000,000NUmber of years = 35Interest rate = 5%We need to find out the annuity payment. Calculaing the annual payment using the formula:Annuity factor at 5% for 35yrs = 16.374CAlculating the present value of the single sum: PV = FV / (1 r)^twhere PV = Present value FV = Future value r = Interest rate t = number of years PV = $2,000,000 / (1 0.05)^35 = $2,000,000 / 5.516 = $362,581.58Therefore, the present value of the lump sum amout is $362,581.58Calculating¦

he annuity payment using the formula: Annuuity present value = C * [(1 “ Present value factor) / r]Where Present value factor = [1/(1 r)^t] = [1 / (1 0.05)^35] = [1 / 5.516] = 0.1813Annuity present value = C * [(1 “ 0.1813) / 0.05] $362,581.58 = C * 16.374 C = $362,581.58 / 16.374 = $22,143.73Therefore. the annuity payment value is $22,144

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