You are planning your retirement. You expect to retire in 40 years at age 65 and your life…

You are planning your retirement. You expect to retire in 40 years at age 65 and your life expectancy after that, according to current mortality tables, is 78. You would like to retire with an annual income (beyond any government payments because you are uncertain if they will exist at that time) of $150,000 in real (today’s) dollars. You believe that the annual inflation rate over the long term will be approxmiately 3.5%. During your retirement years, you will take a conservative approach to investing and expect to earn a nominal after tax rate of 5%. During the period from now until retirement you will be somewhat more aggressive, and expect to earn an average nominal tax sheltered rate of return of 12%.

How much money will you need to have waiting for you when you retire in 40 years to achieve your retirement goal?

How much will you have to contribute to your tax sheltered investment monthly to achieve your goal?

What will be your total out of pocket investment in your retirement fund over the 40 years?