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
edited 7 hours ago
Mathieu Guindon
1033
asked 9 hours ago
Seth
1609
add a comment |
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
edited 7 hours ago
Mathieu Guindon
1033
asked 9 hours ago
Seth
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
add a comment |
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
edited 7 hours ago
Mathieu Guindon
1033
asked 9 hours ago
Seth
1609
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
edited 7 hours ago
Mathieu Guindon
1033
asked 9 hours ago
Seth
1609
edited 7 hours ago
Mathieu Guindon
1033
asked 9 hours ago
Seth
1609
edited 7 hours ago
Mathieu Guindon
1033
edited 7 hours ago
Mathieu Guindon
1033
edited 7 hours ago
Mathieu Guindon
1033
1033
asked 9 hours ago
Seth
1609
asked 9 hours ago
Seth
1609
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
add a comment |
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
add a comment |
1 Answer
1
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.
answered 9 hours ago
D Stanley
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
add a comment |
1 Answer
1
active
oldest
votes
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.
answered 9 hours ago
D Stanley
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
add a comment |
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.
answered 9 hours ago
D Stanley
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
add a comment |
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.
answered 9 hours ago
D Stanley
50.1k8150159
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.
answered 9 hours ago
D Stanley
50.1k8150159
edited 8 hours ago
answered 9 hours ago
D Stanley
50.1k8150159
answered 9 hours ago
D Stanley
50.1k8150159
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
add a comment |
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
add a comment |
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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