I'm not looking for the answers I just don't know how to start this off what method would I use to solve it? I'm using excel

If you are 30 years old and would like to retire at age 70, you believe that you will need $75,000 per year once you have retired for 15 years (your life expectancy is 85). If interest rates are expected to be 6%, how much will you have to put away into savings each year to achieve your retirement goal? What if you only want to make one payment today; how much will you need to put into savings to achieve the same objective?

First step is to determine how much you'll need to have accumulated at the age of 70, in order to receive an annual payout of 75K a year for 15 years, while earning a constant 6% on the undistributed funds. This is the present value of an annuity, and in Excel it's the =PV() function.

Next you'll need to figure out how much of an annual investment is needed, for 40 years, that will accumulate to the value you determined in the first step, while earning a constant 6% on the invested funds. This is the future value of an annuity, and in Excel it's the =FV() function.

Note that in this second step, the FV function returns a future accumulated amount, given a particular annual investment. This is reverse of what you're trying to solve, since here you know the required future amount and you're trying to determine the annual investment. There are different ways to approach it, but your best bet is probably just a little trial and error, where you fiddle with different inputs into the FV function until you get it to return the desired accumulated future value.

For the second question, it's simply the present value of the future accumulated amount you calculated in the first step. If that future amount is "FV", just use the formula

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Originally Posted by ArcSine

First step is to determine how much you'll need to have accumulated at the age of 70, in order to receive an annual payout of 75K a year for 15 years, while earning a constant 6% on the undistributed funds. This is the present value of an annuity, and in Excel it's the =PV() function.

Next you'll need to figure out how much of an annual investment is needed, for 40 years, that will accumulate to the value you determined in the first step, while earning a constant 6% on the invested funds. This is the future value of an annuity, and in Excel it's the =FV() function.

Note that in this second step, the FV function returns a future accumulated amount, given a particular annual investment. This is reverse of what you're trying to solve, since here you know the required future amount and you're trying to determine the annual investment. There are different ways to approach it, but your best bet is probably just a little trial and error, where you fiddle with different inputs into the FV function until you get it to return the desired accumulated future value.

For the second question, it's simply the present value of the future accumulated amount you calculated in the first step. If that future amount is "FV", just use the formula

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thanks I figured it out