9. Your job pays you only once a year for all the work you did over the previous

Question

9. Your job pays you only once a year for all the work you did over the previous 12 months, Today, December 31, you just received your salary of $60,000 and you plan to spend all of it. However, you want to start saving for retirement beginning next year. You have decided that one year from today you will begin depositing 8% your annual salary In an account that will earn 10% per year. Your salary will increase 3% per year throughout your career. How much money will you have on the date of your retirement 40 years from today?

Explanation / Answer

Here the amount of savings is different per year , Retiremnet if 40 years from now, but he will start saving from next year, so the first investment will be next year at 10%. the return on first investment will be Amount*(1+rate)^39,Amount*(1+rate)^38,Amount*(1+rate)^37,Amount*(1+rate)^36and so on.

On the date of retirement total money in hand would be $ 2,950,546

Years Salary with 3 % year on year increase Savings at 8% Total money at 10 % return Year 1                   60,000 Year 2                   61,800                    4,944               203,420 Year 3                   63,654                    5,092               190,475 Year 4                   65,564                    5,245               178,354 Year 5                   67,531                    5,402               167,004 Year 6                   69,556                    5,565               156,376 Year 7                   71,643                    5,731               146,425 Year 8                   73,792                    5,903               137,107 Year 9                   76,006                    6,080               128,382 Year 10                   78,286                    6,263               120,212 Year 11                   80,635                    6,451               112,563 Year 12                   83,054                    6,644               105,400 Year 13                   85,546                    6,844                 98,692 Year 14                   88,112                    7,049                 92,412 Year 15                   90,755                    7,260                 86,531 Year 16                   93,478                    7,478                 81,025 Year 17                   96,282                    7,703                 75,868 Year 18                   99,171                    7,934                 71,040 Year 19                 102,146                    8,172                 66,520 Year 20                 105,210                    8,417                 62,287 Year 21                 108,367                    8,669                 58,323 Year 22                 111,618                    8,929                 54,611 Year 23                 114,966                    9,197                 51,136 Year 24                 118,415                    9,473                 47,882 Year 25                 121,968                    9,757                 44,835 Year 26                 125,627                 10,050                 41,982 Year 27                 129,395                 10,352                 39,310 Year 28                 133,277                 10,662                 36,809 Year 29                 137,276                 10,982                 34,466 Year 30                 141,394                 11,312                 32,273 Year 31                 145,636                 11,651                 30,219 Year 32                 150,005                 12,000                 28,296 Year 33                 154,505                 12,360                 26,496 Year 34                 159,140                 12,731                 24,810 Year 35                 163,914                 13,113                 23,231 Year 36                 168,832                 13,507                 21,752 Year 37                 173,897                 13,912                 20,368 Year 38                 179,114                 14,329                 19,072 Year 39                 184,487                 14,759                 17,858 Year 40                 190,022                 15,202                 16,722 Total               357,126           2,950,546

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