We all want to be able to retire/be financially free, but do you know how long it will take? In this post I show you how our friend "Marty" determines this number. If you have different numbers than Marty, no problem, simply plug your numbers into your calculator to get your answer. Here we go!
Marty is working at his job, and on the side for the past couple of years he has been studying about investing and improving his skills and abilities to make his money work harder, which has resulted in him having $60,000 in his account. Marty eventually wants to have $2,000,000 in his retirement account. Marty is going to invest his $60,000 today and he plans to continue contributing $1,200/month until he reaches his goal. Furthermore, because of Marty's skills and knowledge that he has acquired, he can make his money work at 12% interest. How long until Marty can reach his retirement goal of $2,000,000?
To answer this this question, we need the to use our HP10bii financial calculator and enter the following numbers in the calculator:
N (number of months) = ??? (this is what we are solving)
I/YR (interest rate/year) = 12 (this is the interest at which Marty can make his money work)
PV (present value) = ($60,000) (this is the amount of money Marty starts with today. Note that it is to be entered into the calculator as a negative as Marty is investing it today and will therefore lose access to it while it is earning interest)
PMT (monthly payments) = ($1,200) (these are the payments that Marty will be making every month. Note that these are negative as well as Marty will be losing access to the money as it is accumulating interest)
FV (future value) = $2,000,000 (this is the amount that Marty wants to have to retire)
After entering the 4 numbers above that we know of and solving for the number of months, we get 247.85 months. Meaning that it will take Marty just over 247 months (or slightly more than 20 years to achieve his goal amount of $2,000,000 retirement fund if he invests his $60,000 today and $1,200/month at 12% interest.
How long will it take you to reach your retirement goal?
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