Planning for a Bright Future: Steve's Retirement Fund

How much does Steve need to contribute annually to his retirement fund?

What are the key factors influencing Steve's retirement income goal?

Steve's Annual Contribution to Retirement Fund

Steve needs to contribute approximately $120,000 annually to his retirement fund for 25 years to accumulate $6,000,000 by the day he retires.

Steve's meticulous planning for his retirement showcases a proactive approach towards securing a comfortable future. By setting a goal of accumulating $6,000,000 in inflation-adjusted terms by the time he retires, Steve is taking the necessary steps to achieve financial stability in his later years.

The factors influencing Steve's retirement income goal include his expected inflation-adjusted return on investments of 5% per year before retirement and 2% per year after retirement. These rates play a critical role in determining the amount he needs to contribute annually to reach his target amount.

To calculate the annual contribution needed, Steve can use the Economists (Hanna) method detailed in the Journal of Financial Planning article by Hanna and Kim. By applying the formula for the future value of an annuity, Steve can determine the required annual payment to achieve his $6,000,000 target.

With dedication and disciplined financial planning, Steve's goal of accumulating $6,000,000 for retirement is within reach. By consistently contributing approximately $120,000 annually to his retirement fund, Steve is paving the way for a secure and prosperous future.