Thread: investment question

Tammy has joined a 401K plan with her company. Her goal is a total value of $2,000,000 when she retires in 45 years. With an expectant growth rate of 10% and being paid bi-weekly (26 times a year).

What amount should she have deducted from her paycheck in order to meet her goal?

Hello, Linda!

Tammy has joined a 401K plan with her company.
Her goal is a total value of $2,000,000 when she retires in 45 years.
With an expectant growth rate of 10% and being paid bi-weekly (26 times a year),
what amount should she have deducted from her paycheck in order to meet her goal?

This is an Annuity . . .
. . I will assume that the interest is computed bi-weekly.

The formula is: .

. . where: .


We have: .

Hence: .


Therefore, Tammy should authorize an $87.17 bi-weekly deduction.


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Actually, she should authorize an $87.18 deduction.

Rounding down, she will be about $32 short of her two million dollars.
. . (But being a bi-millionaire at the time, she probably won't care.)