RETIREMENT INVESTMENTS|My homework helper
Posted: March 15th, 2023
o live comfortably in retirement, you decide you will need to save $2 million by the time you are 65 (you are 30 years old today). You will start a new retirement savings account today and contribute the same amount of money on every birthday up to and including your 65th birthday. Using TVM principles, how much must you set aside each year to make sure that you hit your target goal if the interest rate is 5%? What flaws might exist in your calculations, and what variables could lead to different outcomes? What actions could you take ensure you reach your target goal?
SOLUTION
However, this calculation assumes that the interest rate remains constant over the entire 35-year period, which is unlikely. Interest rates can fluctuate significantly over time, and a lower interest rate would require higher annual contributions to achieve the same savings goal.Other variables that could affect the outcome include the individual’s current income, expenses, and lifestyle choices. The calculation also assumes that the individual does not withdraw any funds before age 65 and does not experience any unexpected financial setbacks or emergencies.
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