6. you have 45 years left until retirement and want to retire with $4 million. your salary is paid annually, and you will receive $50,000 at the end of the current year. your salary will increase at 3 percent per year, and you can earn an annual return of 9 percent on the money you invest. if you save a constant percentage of your salary, what percentage of your salary must you save each year?

Instructions are listed below.

Explanation:

Giving the following information:

You have 45 years left until retirement and want to retire with $4 million. Your salary is paid annually, and you will receive $50,000 at the end of the current year. Your salary will increase at 3 percent per year, and you can earn an annual return of 9 percent on the money you invest.

n= 45

FV= 4,000,000

i= 9% + 3%= 12%

We need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (4,000,000*0.12)/{(1.12^45)-1}= $2,945

5.89% per year.

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.

you will have $2593.74 in 10 years if you set aside $1,000 at 10%

you will have $9321.91 in 20 years if you set aside $2000 at 8%

you will have $1469.32 in 5 years if you set aside $1000 at 8%

you will have $1296.87 in 10 years if you set aside $500 at 10%

you will have $239.66 in 15 years if you set aside $100 at 6%

you will have $4660.96 in 20 years if you set aside $1000 at 8%