Question 754985
I invest $50 a month in a 401k. Assuming an annual rate of return of 9%, how much will this fund be worth if retiring in 40 years?

My problem in trying to figure this out is dividing the 9% rate out monthly.


The easiest method is to apply the formula for the future value of an ordinary annuity, which is: {{{highlight(FV[oa] = PMT((1 + i/m)^mt - 1)/(i/m)))}}}, with:

{{{FV[ao]}}} being future value of an ordinary annuity


{{{PMT}}} being payment, which in this case is $50


{{{i}}} being interest rate, or .09 in this case


{{{m}}} being the amount of compounding periods, per year (12 in this case since payments would be monthly)


{{{t}}} being time, in years (40 in this case)


With that you'll have a total of ${{{highlight_green(234066.01)}}} in 40 years.