Investment model

Maggie is 25 years old, has just graduated and is starting her first job. Given the current economic environment she is concerned about the future; in particular, about retirement. She has been told that she will need a retirement fund of about $1,000,000 when she retires at 65.

Maggie wants to know how much she will need to put into an IRA each year over the next 40 years in order to have the $1,000,000. She expects that investments will grow 6% each year over the 40 years. If she increases her contribution each year to match inflation, averaging 2.5% how much will she need to contribute? Develop a spreadsheet model.

Remember whatever formula you learned in your finance class? Future Value formula P ((1+r)^n- (1+g)^n)/r-g)