Discussion Post
• Using the TVM (Time Value of Money Calculator) determine how much you need to save monthly to reach $1,000,000 in savings over a 20 year time period, over 30 years and over 40 years at a 5% annual return. You simply need to plug in the numbers into the boxes. You are solving for PMT, so once you input the given values, hit the PMT to determine the monthly payment amount. Be sure to set the compounding box to monthly and in the number of payments to the total number of months (20x12; 30x12; and 40x12). You should see a significant difference in the amount you need to save each month depending on how long you invest. You will calculate 3 amounts.
• Now calculate the lump sum you would need today under the 3 scenarios. In other words, calculate for PV using the 5% return over 20, 30 and 40 years. You will include a payment since the only payment is the lump sum you need today to reach the $1,000,000 in 20, 30, and 40 years. In this case, be sure to set the compounding periods to annual. You are calculating 3 amounts.
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