You want to have $1,200,000 when you retire and you are in a defined contribution plan. You can earn 9 percent per year on the money invested and you will retire in 25 years. Your employer also contributes to your plan. The employer will contribute 4 percent of what you put into the plan each year. How much do you have to contribute per year to meet your goal

Annual deposit = $13,600.8

Explanation:

Giving the following information:

You want to have $1,200,000 when you retire and you are in a defined contribution plan.

Interest rate = 9%

Number of years = 25 years.

The employer will contribute 4 percent of what you put into the plan each year.

First, we need to calculate the total annual contribution:

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

A = annual deposit

Isolating A:

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

A = (1,200,000*0.09) / [ (1.09^25) - 1]

A = $14,167.50

Now, your annual deposit:

Annual deposit = 14,167.5*0.96 = $13,600.8