Discussion Week 3 Question 1 Retirement Planning Chapter 4 - Assignment Example

Retirement planning Retirement planning It is important to plan for ones retirement. This is because, when retiring, onesage makes it difficult for them to generate income. This is one of the major reasons why planning for ones retirement is very important. According to Jasper (2004), there various ways of planning for ones retirement, but setting up a pension scheme is the best way.A pension is amount of money in which one pays or is deducted in order for them to have an income after reaching the age of retirement where they do not have to work.

There various ways of calculating the amount of money one needs to save in order for them to meet a certain amount in which they will be receiving as their retirement income, (Marx 2004). For example, currently I am twenty five years of age and earn a salary of 70,000 dollars per year. I would like to plan my retirement such that at the age of sixty five, I would like to be earning a retirement income of 60,000 dollars per annumFor me to realize my retirement plan, I will need to calculate the amount of money I will be saving a side per year as a pension policy.

For me to do this I will use the following formulae; FVn= PV(1+I)n, where PV is the amount at the beginning, I the interest, and FVn is the amount you intend to save up by the time you retire n being the number of years rate (Brigham & Ehrhardt, 2011).Assuming the interest rate will be 5%, then FVn= PV (1+I)n (Brigham & Ehrhardt, 2011).60,000=x (1+0.05)40X= 60000/1.0540X= 8522.73I will need to make sure I save 8522.73 dollars per year so that I can get an annual retirement income of $60,000Works CitedBrigham, E & Ehrhardt. M. C. (2011). Financial Management: Theory and Practice.

Belmont: Cengage Learning.Jasper, C. (2004). Retirement Planning. Virginia: Oceana.Marx, J. (2004). Financial Calculator for Time Value of Money. Johannesberg: Pearson,