Question: Refer to Example. Sara has decided that saving more than 12% of her annual salary was unrealistic. She is considering postponing her retirement until 2027, but still wishes to have $500,000 (in 1997 spending power) at that time. Determine what percentage of her annual salary Sara will have to save to meet her objective.
Example: Saving to Meet a Retirement Goal Sara B. Goode wishes to retire in the year 2022 with personal savings of $500,000 (1997 spending power). Assume that the expected inflation rate in the economy will average 3.75% per year during this period. Sara plans to invest in a 7.5% per year savings account, and her salary is expected to increase by 8.0% per year between 1997 and 2022. Assume that Sara's 1997 salary was $60,000 and that the first deposit took place at the end of 1997. What percent of her yearly salary must Sara put aside for retirement purposes to make her retirement plan a reality?