Minimum Nest Egg in Today's Dollars?





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As a follow-on to this question, if you wanted to have a $2.5 million nest egg in 20 years, what would the nest egg value have to be today (assuming no future contributions)?



Assume:




  • 20 years until first withdrawal

  • 4.0% annual inflation

  • 8.0% annual return

  • $2.5 million future balance






401k retirement interest inflation







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  • 1




    I downvoted and would vote to close but I don't have the rep on this site as this is clearly homework with no effort shown.
    – Ross Millikan
    2 hours ago

















up vote
2
down vote

favorite












As a follow-on to this question, if you wanted to have a $2.5 million nest egg in 20 years, what would the nest egg value have to be today (assuming no future contributions)?



Assume:




  • 20 years until first withdrawal

  • 4.0% annual inflation

  • 8.0% annual return

  • $2.5 million future balance






401k retirement interest inflation







share|improve this question




















  • 1




    I downvoted and would vote to close but I don't have the rep on this site as this is clearly homework with no effort shown.
    – Ross Millikan
    2 hours ago













up vote
2
down vote

favorite









up vote
2
down vote

favorite











As a follow-on to this question, if you wanted to have a $2.5 million nest egg in 20 years, what would the nest egg value have to be today (assuming no future contributions)?



Assume:




  • 20 years until first withdrawal

  • 4.0% annual inflation

  • 8.0% annual return

  • $2.5 million future balance






401k retirement interest inflation







share|improve this question















As a follow-on to this question, if you wanted to have a $2.5 million nest egg in 20 years, what would the nest egg value have to be today (assuming no future contributions)?



Assume:




  • 20 years until first withdrawal

  • 4.0% annual inflation

  • 8.0% annual return

  • $2.5 million future balance






401k retirement interest inflation




401k retirement interest inflation






share|improve this question















share|improve this question













share|improve this question




share|improve this question








edited 7 hours ago









Mathieu Guindon

1033




1033










asked 9 hours ago









Seth

1609




1609








  • 1




    I downvoted and would vote to close but I don't have the rep on this site as this is clearly homework with no effort shown.
    – Ross Millikan
    2 hours ago














  • 1




    I downvoted and would vote to close but I don't have the rep on this site as this is clearly homework with no effort shown.
    – Ross Millikan
    2 hours ago








1




1




I downvoted and would vote to close but I don't have the rep on this site as this is clearly homework with no effort shown.
– Ross Millikan
2 hours ago




I downvoted and would vote to close but I don't have the rep on this site as this is clearly homework with no effort shown.
– Ross Millikan
2 hours ago










1 Answer
1






active

oldest

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up vote
9
down vote













The formula for future value with no contribution is just FV = PV(1+r)^n, so reversing that to find present value, you get PV = FV / (1+r)^n.



So in your case:



     2,500,000 

PV = ---------  = 536,360

     (1.08)^20


Note that inflation is irrelevant in your question since you didn't ask about the equivalent of 2.5 million in today's dollars. But if you wanted that, you'd just subtract the rate of inflation from r and make the same calculation.






share|improve this answer























  • When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
    – Bob
    4 hours ago










  • Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
    – JoeTaxpayer♦
    3 hours ago











Your Answer








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1 Answer
1






active

oldest

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1 Answer
1






active

oldest

votes









active

oldest

votes






active

oldest

votes








up vote
9
down vote













The formula for future value with no contribution is just FV = PV(1+r)^n, so reversing that to find present value, you get PV = FV / (1+r)^n.



So in your case:



     2,500,000 

PV = ---------  = 536,360

     (1.08)^20


Note that inflation is irrelevant in your question since you didn't ask about the equivalent of 2.5 million in today's dollars. But if you wanted that, you'd just subtract the rate of inflation from r and make the same calculation.






share|improve this answer























  • When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
    – Bob
    4 hours ago










  • Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
    – JoeTaxpayer♦
    3 hours ago















up vote
9
down vote













The formula for future value with no contribution is just FV = PV(1+r)^n, so reversing that to find present value, you get PV = FV / (1+r)^n.



So in your case:



     2,500,000 

PV = ---------  = 536,360

     (1.08)^20


Note that inflation is irrelevant in your question since you didn't ask about the equivalent of 2.5 million in today's dollars. But if you wanted that, you'd just subtract the rate of inflation from r and make the same calculation.






share|improve this answer























  • When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
    – Bob
    4 hours ago










  • Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
    – JoeTaxpayer♦
    3 hours ago













up vote
9
down vote










up vote
9
down vote









The formula for future value with no contribution is just FV = PV(1+r)^n, so reversing that to find present value, you get PV = FV / (1+r)^n.



So in your case:



     2,500,000 

PV = ---------  = 536,360

     (1.08)^20


Note that inflation is irrelevant in your question since you didn't ask about the equivalent of 2.5 million in today's dollars. But if you wanted that, you'd just subtract the rate of inflation from r and make the same calculation.






share|improve this answer














The formula for future value with no contribution is just FV = PV(1+r)^n, so reversing that to find present value, you get PV = FV / (1+r)^n.



So in your case:



     2,500,000 

PV = ---------  = 536,360

     (1.08)^20


Note that inflation is irrelevant in your question since you didn't ask about the equivalent of 2.5 million in today's dollars. But if you wanted that, you'd just subtract the rate of inflation from r and make the same calculation.







share|improve this answer














share|improve this answer



share|improve this answer








edited 8 hours ago

























answered 9 hours ago









D Stanley

50.1k8150159




50.1k8150159












  • When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
    – Bob
    4 hours ago










  • Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
    – JoeTaxpayer♦
    3 hours ago


















  • When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
    – Bob
    4 hours ago










  • Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
    – JoeTaxpayer♦
    3 hours ago
















When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
4 hours ago




When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
4 hours ago












Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
– JoeTaxpayer♦
3 hours ago




Just as I was about to comment that 4% felt high, I looked at inflation for 50 years 1967-2017, and sure enough, 4.1% CAGR. Spoiled by the recent low rates, last 20 years or so.
– JoeTaxpayer♦
3 hours ago


















 

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