You just turned 25 years old. You plan on retiring when you turn 67 years old. You have done some very careful calculating, and you have determined that when you retire, you would like to be able to have precisely $9,905.82 a month at your disposal. You would like that $9,905.82 until you turn 80 years old, at which point you will simply live on your social security income. You forecast your social security income to be $3,000 a month from age 67 until you pass away. In addition, your employer will match your retirement savings at 50 cents on the dollar. In other words, if you save $100 per month toward retirement, your employer will deposit an additional $50 in your retirement account.

Assume that you can earn 3% annually over time.

A summary of the facts:

Deposits will be made monthly, and withdrawals will be made monthly. N for deposits equals 480 (40 years x 12 months per year). N for withdrawals equals 180 (15 years x 12 months per year). I for both deposits and withdrawals equals 0.25 (3% / 12 months).

How much money must you have available in your retirement account when you turn 67? Hint: Compute the present value (PV) of the amount you expect to receive after you retire. Don't forget to factor out your expected social security. How much money must be saved each month to accumulate the amount in (a)? Hint: Compute the payment (PMT) amount for 40 years to arrive at the PV amount (which for this question will be the Future Value [FV] amount) computed in the first question. How much must you contribute each month toward your retirement? Hint: Remember that your employer contributes toward the monthly PMT. Consider where you are in your career. What changes would you need to make to the inputs to get your desired retirement savings outcome? Which of the inputs in the above computations are most subjective?