You are planning for retirement and have the following information.
You expect inflation during your working years to be 4% on average.
You predict that you will be able to earn an average of 10% per year on your invested funds during the entire planning horizon.
1) The current salary you earn is $50000 and you want to be able to have the same purchasing power for each year of your retirement. How much will you need for each year of retirement If you plan to retire 30 years from now?
2) If you plan to be in retirement for 20 years and want the income determined in question 1, what is the amount that must be in your retirement account when you retire?
3) How much would you need to invest each year during your working years to have the amount from question 2 in your account when you retire?
4) Now a more realistic scenario. How much would you need to invest each month during your working years to have the amount from question 2 in your account when you retire?