Question: A 40 year old banker plans to retire at age 65. She expects to average a 6% annual rate of interest on her savings (both prior to retirement and after retirement). She wants enough saved money to provide $8,000 per year of retirement income to supplement other sources (social security, pension plans, etc.). Assume the extra income will be needed for 15 years (up to age 80). Her first contribution to the savings plan will take place one year from now.
How much must the banker save each year between now and retirement to achieve her goal?