Amount to be save = 2,000,000
N = 35
r =5%
Future Value Amount = PMT * ( (1+r)n -1)/r + (PMT at age
of 65)
Amount = PMT *((1.05)35-1)/0.05 + PMT
2,000,000 = 91.32 * PMT
Each Year PMT = 21,900.93
The flaw in the calculation is it does not include the effect of
inflation and also interest rate doesn't remain constant it keeps
on fluctuating in real life scenario .So including inflation would
yield different results and the amount to be saved per year will
increase.
Real interest rate should be calculated using inflation rates as
base and the discounting factor will decrease , so payments per
year has to be increased to achieve real life goals.
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