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Computing the future value at retirement

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Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $40,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 10%.

The future value (FV) at retirement (age 65) of your savings is closest to ________.

  • $1,590,084
  • $1,445,531
  • $722,766
  • $1,011,872

 

Reference no: EM131213968

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