You wish to have 3 Million set aside by the time you retire

You wish to have $3 Million set aside by the time you retire in 40 years. Assuming a 12% annual interest rate compounded annually, what annual sum must be set aside? 8)

Solution

Future worth (FW) = Annual savings x P/A(r%, N), therefore

Annual savings = FW / P/A(r%, N)

Required annual sum = $3,000,000 / P/A(12%, 40) = $3,000,000 / 8.2438** = $363,909.85

**From P/A Factor table