S has decided that he wants to build enough retirement wealth that, if invested at 7 percent per year, will provide him with $3,000 of monthly income for 30 years. To date, he has saved nothing, but he still has 20 years until he retires. How much money does he need to contribute per month to reach his goal

Annual deposit= $26,344.36

Explanation:

Giving the following information:

The interest rate is 7 percent per year.

He wants to have enough money to provide him with $3,000 of monthly income for 30 years. To date, he has saved nothing, but he still has 20 years until he retires.

First, we need to calculate the total amount of money required:

Final value= 3,000* (30*12)= $1,080,000

Now, we can calculate the annual deposit:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

FV= 1,080,000

i= 0.07

n= 20

A= (1,080,000*0.07) / [(1.07^20) - 1]= $26,344.36

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