You just turn to 30 years old. You got a good job and lived the good life but did not contribute to your 401K or save anything for your future. You now realize you would like to retire in 30 years (age 60). You are currently making $90K a year. After your life expenditure and taxes, you are able to save 10% of your salary. You come from a family with really good genes so you expect to live another 25 years after retirement (to an age of 85 years old). You do not want to be a burden on your family and it’s not likely there will be any social security by the time you retire so you’ll have to rely totally on your own resources. You believe you can live comfortably on $70K a year after retirement (this would cover living expenses and taxes). While you are saving for retirement, your investments will earn 5%, however, after retirement you will move your funds to a safer investment that will only pay 3%. Assume there is no inflation.
You can only use present value, future value or net present value functions and it has to be done in Excel.
1. How much will you need to have saved by the time you retire? Use one function to get the answer.
2. According to how much you are saving per year now, how much would you have in your savings at the time of your retirement? Use one function to get the answer.