Question

Your job pays you only once a year for all the work you did over the previous 12 months. Today, December 31, you received your salary of $68,000 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 10 percent of your annual salary in an account that will earn 10.8 percent per year. Your salary will increase at 2 percent per year throughout your career.

How much money will you have on the date of your retirement 35 years from today? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

The amount that you will have on the date of your retirement 35 years from today will be $2,696,793.33

Calculations:

Years	Salary (after incorporating 2% annual increase)	Annual savings (10% of salary)	1+r	FVIF	FV = Annual savings*FVIF
1	69,360.00	6,936.00	1.108	32.68525	226,704.92
2	70,747.20	7,074.72		29.49933	208,699.47
3	72,162.14	7,216.21		26.62394	192,124.06
4	73,605.39	7,360.54		24.02883	176,865.11
5	75,077.49	7,507.75		21.68667	162,818.06
6	76,579.04	7,657.90		19.5728	149,886.66
7	78,110.63	7,811.06		17.66499	137,982.31
8	79,672.84	7,967.28		15.94313	127,023.42
9	81,266.29	8,126.63		14.3891	116,934.92
10	82,891.62	8,289.16		12.98656	107,647.67
11	84,549.45	8,454.95		11.72072	99,098.04
12	86,240.44	8,624.04		10.57827	91,227.43
13	87,965.25	8,796.53		9.547172	83,981.93
14	89,724.56	8,972.46		8.616581	77,311.89
15	91,519.05	9,151.90		7.776698	71,171.59
16	93,349.43	9,334.94		7.01868	65,518.98
17	95,216.42	9,521.64		6.334549	60,315.30
18	97,120.74	9,712.07		5.717102	55,524.92
19	99,063.16	9,906.32		5.159839	51,115.00
20	101,044.42	10,104.44		4.656895	47,055.32
21	103,065.31	10,306.53		4.202973	43,318.08
22	105,126.62	10,512.66		3.793297	39,877.65
23	107,229.15	10,722.91		3.423554	36,710.47
24	109,373.73	10,937.37		3.08985	33,794.84
25	111,561.21	11,156.12		2.788673	31,110.77
26	113,792.43	11,379.24		2.516853	28,639.88
27	116,068.28	11,606.83		2.271528	26,365.23
28	118,389.65	11,838.96		2.050115	24,271.24
29	120,757.44	12,075.74		1.850285	22,343.56
30	123,172.59	12,317.26		1.669932	20,568.99
31	125,636.04	12,563.60		1.507159	18,935.35
32	128,148.76	12,814.88		1.360252	17,431.46
33	130,711.74	13,071.17		1.227664	16,047.01
34	133,325.97	13,332.60		1.108	14,772.52
35	135,992.49	13,599.25		1	13,599.25
				Total	2,696,793.33