Minimum Nest Egg in Today's Dollars? [closed]
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
Please note: I'm not in school and this isn't a homework question. I'm just trying to learn what formulas are needed for retirement planning.
401k retirement interest inflation
asked Nov 20 '18 at 20:43
SethSeth
17010
closed as off-topic by Aganju, Dheer, Pete B., Bob Baerker, Nathan L Nov 21 '18 at 15:05
- This question does not appear to be about Personal Finance within the scope defined in the help center.
If this question can be reworded to fit the rules in the help center, please edit the question.
add a comment |
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
Please note: I'm not in school and this isn't a homework question. I'm just trying to learn what formulas are needed for retirement planning.
401k retirement interest inflation
asked Nov 20 '18 at 20:43
SethSeth
17010
closed as off-topic by Aganju, Dheer, Pete B., Bob Baerker, Nathan L Nov 21 '18 at 15:05
- This question does not appear to be about Personal Finance within the scope defined in the help center.
If this question can be reworded to fit the rules in the help center, please edit the question.
4
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
Nov 21 '18 at 3:50
6
I'm voting to close this question as off-topic because this looks like a homework question with no solution effort shown.
– Aganju
Nov 21 '18 at 6:30
@Aganju This is not a homework question.
– Seth
Nov 28 '18 at 19:08
We could reopen this question, but we'd then have to close it as a duplicate of money.stackexchange.com/questions/26368
– Nathan L
Nov 29 '18 at 20:38
add a comment |
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
Please note: I'm not in school and this isn't a homework question. I'm just trying to learn what formulas are needed for retirement planning.
401k retirement interest inflation
asked Nov 20 '18 at 20:43
SethSeth
17010
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
Please note: I'm not in school and this isn't a homework question. I'm just trying to learn what formulas are needed for retirement planning.
401k retirement interest inflation
401k retirement interest inflation
asked Nov 20 '18 at 20:43
SethSeth
17010
asked Nov 20 '18 at 20:43
SethSeth
17010
edited Nov 29 '18 at 17:55
Seth
asked Nov 20 '18 at 20:43
SethSeth
17010
asked Nov 20 '18 at 20:43
SethSeth
17010
asked Nov 20 '18 at 20:43
SethSeth
17010
17010
closed as off-topic by Aganju, Dheer, Pete B., Bob Baerker, Nathan L Nov 21 '18 at 15:05
- This question does not appear to be about Personal Finance within the scope defined in the help center.
If this question can be reworded to fit the rules in the help center, please edit the question.
closed as off-topic by Aganju, Dheer, Pete B., Bob Baerker, Nathan L Nov 21 '18 at 15:05
- This question does not appear to be about Personal Finance within the scope defined in the help center.
If this question can be reworded to fit the rules in the help center, please edit the question.
4
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
Nov 21 '18 at 3:50
6
I'm voting to close this question as off-topic because this looks like a homework question with no solution effort shown.
– Aganju
Nov 21 '18 at 6:30
@Aganju This is not a homework question.
– Seth
Nov 28 '18 at 19:08
We could reopen this question, but we'd then have to close it as a duplicate of money.stackexchange.com/questions/26368
– Nathan L
Nov 29 '18 at 20:38
add a comment |
4
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
Nov 21 '18 at 3:50
6
I'm voting to close this question as off-topic because this looks like a homework question with no solution effort shown.
– Aganju
Nov 21 '18 at 6:30
@Aganju This is not a homework question.
– Seth
Nov 28 '18 at 19:08
We could reopen this question, but we'd then have to close it as a duplicate of money.stackexchange.com/questions/26368
– Nathan L
Nov 29 '18 at 20:38
4
4
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
Nov 21 '18 at 3:50
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
Nov 21 '18 at 3:50
6
6
I'm voting to close this question as off-topic because this looks like a homework question with no solution effort shown.
– Aganju
Nov 21 '18 at 6:30
I'm voting to close this question as off-topic because this looks like a homework question with no solution effort shown.
– Aganju
Nov 21 '18 at 6:30
@Aganju This is not a homework question.
– Seth
Nov 28 '18 at 19:08
@Aganju This is not a homework question.
– Seth
Nov 28 '18 at 19:08
We could reopen this question, but we'd then have to close it as a duplicate of money.stackexchange.com/questions/26368
– Nathan L
Nov 29 '18 at 20:38
We could reopen this question, but we'd then have to close it as a duplicate of money.stackexchange.com/questions/26368
– Nathan L
Nov 29 '18 at 20:38
add a comment |
1 Answer
1
active
oldest
votes
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 Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
2
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
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♦
Nov 21 '18 at 2:14
add a comment |
1 Answer
1
active
oldest
votes
1 Answer
1
active
oldest
votes
active
oldest
votes
active
oldest
votes
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 Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
2
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
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♦
Nov 21 '18 at 2:14
add a comment |
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 Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
2
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
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♦
Nov 21 '18 at 2:14
add a comment |
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 Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
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 Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
edited Nov 20 '18 at 21:42
answered Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
answered Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
answered Nov 20 '18 at 20:54
D StanleyD Stanley
55.8k9166170
55.8k9166170
2
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
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♦
Nov 21 '18 at 2:14
add a comment |
2
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
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♦
Nov 21 '18 at 2:14
2
2
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
When you adjust for inflation, the number I compute is 536,360*(1.04)^20 or 1,175,230.
– Bob
Nov 21 '18 at 2:03
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♦
Nov 21 '18 at 2:14
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♦
Nov 21 '18 at 2:14
add a comment |
4
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
Nov 21 '18 at 3:50
6
I'm voting to close this question as off-topic because this looks like a homework question with no solution effort shown.
– Aganju
Nov 21 '18 at 6:30
@Aganju This is not a homework question.
– Seth
Nov 28 '18 at 19:08
We could reopen this question, but we'd then have to close it as a duplicate of money.stackexchange.com/questions/26368
– Nathan L
Nov 29 '18 at 20:38