Read the following and comment on what you think or feel or what impressions you have about what you have read. Although we have completed our lectures on compound interest, the Excel Labs past, present, & future still have some relevance to the topic.

Assume you are 26 and just received your MBA (Masters in Business Administration). After learning about compound interest similar to earlier in this course, you start investing in the stock market for your retirement. Your goal is to have $1 million when you retire at age 65. Assuming you earn 10% annually on your stock investments, how much must you invest at the end of each year in order to reach your goal?

The answer is $2491; but, this amount depends critically on the return your investments earn. If your return drops to 8%, the required annual contribution would rise to $4185. On the other hand, if the return rises to 12%, you would need to put away only $1462 per year.

What if you are like most 26-year-olds and wait until later to worry about retirement? If you wait until age 40, you will need to save $10,168 per year to reach your $1 million goals, assuming you earn 10%; but, $13,679 per year if you earn only *5. If you wait until age 50 and then earn 8%, the required amount will be $36,830 per year.

Although $1 million may seem like a lot of money, it won't be when you get ready to retire, If inflation averages 5% a year over the next 39 years, then your $1 million nest egg would be worth only $149,148 in today's dollars. If you live 20 years after retirement and earn a real 3% rate of return, your annual retirement income in today's dollars would be only $9733 before taxes.