Reference no: EM133633393

Question: Suppose that you begin planning your investments on your 40th birthday (the sooner you start, the better!), retire at the age of 65, and expect some amount of growth in your salary year to year. Further suppose that you intend to invest some consistent proportion of your income each year and wish to understand the final value of your retirement account based on what proportion of your income you invest each year. Finally, to make the math easier, let's assume that you deposit each year's investment all at once at the beginning of the year. NOTE: Like the demonstration video from this Module, you can tweak and reuse this template for your own personal planning :)

Part 1

Suppose you've set a goal of having a million dollars in your retirement portfolio by the age of 60; begin by developing a what-if model using the template provided to represent the problem above i.e. to assess what balance you can expect at the age of 60. To make the math easy, assume for the moment that both your salary growth and your portfolio's return on investment will be consistent each year. To validate your model, enter an Annual Investment Rate of 7.5%; if you have built the model correctly, you should find a Total Profit of $907,782. Once you've confirmed that your what-if model is correct, use Goal Seek to determine the minimum Annual Investment Rate necessary to have a balance of at least $1,000,000 when you turn 60.