You believe you will need to have saved $594,000 by the time you retire in 40 years in order to live comfortably. You also believe that you will inherit $106,000 in 10 years.

You believe you will need to have saved $594,000 by the time you retire in 40 years in order to live comfortably. You also believe that you will inherit $106,000 in 10 years.



If the interest rate is 6% per year, what is the future value of your inheritance at retirement?


How much additional money must you save to meet your retirement goal, assuming you save your enture inheritance?



Explanation
Some values below may show as rounded for display purposes, though unrounded numbers should be used for actual calculations.

Compute the future value of the inheritance:

FV	=	PV × (1 + r)t
	=	$106,000 × 1.06(40 – 10)
	=	$608,810.06

If you save your inheritance, it will fully fund your projected retirement needs. Thus, you will not have to save any additional money.

Calculator computations:

Enter

30

6

–106,000

N

I/Y

PV

PMT

FV

Solve for

608,810.06