Question

You plan to retire in 21 years. You would like to maintain your current level of consumption which is $56,738 per year. You will need to have 21 years of consumption during your retirement. You can earn 4.76% per year (nominal terms) on your investments. In addition, you expect inflation to be 2.2% inflation per year, from now and through your retirement.

How much do you have to invest each year, starting next year, for 8 years, in nominal terms to just cover your retirement needs?

Answer 1

=56738/(1.0476/1.022-1)*(1-1/(1+1.0476/1.022-1)^21)*(1+2.2%)^13*4.76%/((1+4.76%)^8-1)
=128644.2611658