SOLUTION: You think you need 1.5 million and your retirement advisor thinks you will average 8% a year on your account. How much will you need to contribute a year to your account if you hav

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Question 1036407: You think you need 1.5 million and your retirement advisor thinks you will average 8% a year on your account. How much will you need to contribute a year to your account if you have 40 years to your retirement?
Found 2 solutions by Aldorozos, MathTherapy:
Answer by Aldorozos(172)   (Show Source): You can put this solution on YOUR website!


Here is the solution:

Go to the following site:
http://www.calculator.net/investment-calculator.html
Your target: 1500000
After: 40
Starting Principal: 0
Annual Return: 8
Make sure change the radio button (the small circle) from monthly to annually since you want to calculate annual payment instead of monthly payment. Then click calculate. You will see on the right side the green number as $5790.24
This means than you have to contribute $5760.24 every year at the end of the year for 40 years. If you do that you end up
investing $231,609.60 and earning $1,268,389.83 interest. The total will be 1.5 M
You will see a table at the bottom of the link. Go through the table to understand. Also there are some videos below to familiarize you with the concepts. Sometimes students who have Microsoft Outlook through their college can download free version of Microsoft Office (Excel). You may check with your school to see if they provide free version of Excel. See the picture below and the videos below. Go to the link you got and plug the numbers.



Answer by MathTherapy(10552)   (Show Source): You can put this solution on YOUR website!

You think you need 1.5 million and your retirement advisor thinks you will average 8% a year on your account. How much will you need to contribute a year to your account if you have 40 years to your retirement?
You need to use the formula to calculate the payment on the FUTURE VALUE of an ORDINARY ANNUITY, which is: , where:

  = Payment, per period (Unknown, in this case)

 = Future Value of an ordinary annuity ($1,500,000, in this case)

    = Annual Interest rate (8%, or .08, in this case)

    = Compounding periods, per year (annual, or 1, in this case)

    = Time, in years (40, in this case)



After substituting the various variables, you should get an annual payment (PMT) of  

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