Based on 12 years until retirement of 67 present age 55 calc

Based on 12 years until retirement of 67, present age 55, calculated the monthly saving required to build a portfolio of $500,000. Assumed you are starting with zero saving, can earn 6 percent a year, and that you start saving on the first of each month.

FV of annuity due = (1+r) x P{[(1+r)^n - 1]/r}, FV of annuity due i.e. future value =$500000, P = monthly savings = ?, r = rate of interest per month = 6%/12 = 0.005, n = number of month = 12 years * 12 = 144. Please help me. I am struggling . thank you.

Solution

PMT = Payment = ?

FV = 5,00,000

Rate = r = 6%/12 = 0.005

Time = n = Years x frequency of compounding payments = 12 x 12 = 144

Formula: Annuity invested beginning of period to get FV

#

PMT = FV/(((1+r)^n-1)/r*((1+r)))

PMT = 500000/(((1+0.005)^144-1)/0.005*((1+0.005))) =

$2,367.41