Suppose that you’d like to retire in 40 years and you want to have a future value of $ 600000 in a savings account. Also suppose that your employer makes regular monthly payments into your retirement account.
If you can expect an APR of 8.5% for your account, how much do you need your employer to deposit each month?
Employer Contribution =
The formulas we have been using assume that the interest rate is constant over the period in question. Over a period of 40 years, though, interest rates can vary widely. To see what difference the interest rate can make, let’s assume a constant APR of 3% for your retirement account. How much do you need your employer to deposit each month under this assumption?
Employer Contribution =