Devoted to understanding the basics and fundamentals of investing

In my last post we saw that a person who wants to have $70,000 in annual income from a portfolio yielding 8% without spending principal would need to have $875,000 in savings when he or she retired.

The question today is, how much do I need to save each year to have $875,000 in savings when I retire?  The answer of course depends on how long you have to save.  I will give three examples, 10 years, 20 years, and 40 years.  These would correspond to late career, mid-career, and start of a career.

Again, we will assume that you can earn a return of 8% on your savings.  Using my trusty financial calculator we put $875,000 in the Future Value bucket, 10 years in the period bucket and 8% in the interest bucket.  We solve for payments and get $60,400 per year.  Moving to 20 years you get $19,121.  Finally, if you have 40 years, you only need to save $3,378 per year.