Gary Kornig will be 30 years old next year and wants to retire when he is 65. So
ID: 2775798 • Letter: G
Question
Gary Kornig will be 30 years old next year and wants to retire when he is 65. So far he has saved (1) $5,630 in an IRA account in which his money is earning 8.3 percent annually and (2) $5,770 in a money market account in which he is earning 5.25 percent annually. Gary wants to have $1 million when he retires. Starting next year, he plans to invest the same amount of money every year until he retires in a mutual fund in which he expects to earn 9.10 percent annually. How much will Gary have to invest every year to achieve his savings goal?
Explanation / Answer
so the net equation
when he is 65
IRA account value + money market account value + investment in mutual fund value = 1000000
=>
5630 * (1+8.3%)^35 + 5770 * (1+5.25%)^35 + x * [(1+9.1%)^35 -1]/9.1% = 1000000
=>
x = 3959.46
hence he needs to save $3959.46 every year
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