Originally Posted by
JMT21
Regardless of inflation and assuming the previous facts, you will have $3.2 million in the bank. Agreed. The debate is over the present value computations. I'm almost positive that using the net interest rate (8%) doesn't work because of the way compound interest works. Here's the present value formula:
Future Value = $3.2 million
i = 4%
n = 35 years
I still say having $3.2 million 35 years from now is the same as having $811k today, assuming inflation is 4%.
I will talk to my finance prof Monday and get a definite answer.
Your first sentence after you listed the formula is 100% correct. The difference in the amount of today's dollars that our theoretical investor would have at 65 manifested itself because the calculator i was using was making inflation adjustments to the periodic contributions as well. in other words. the 500 per month became more per month over time such that each monthly deposit was the present value of today's 500. my head hertz'... I'm done. i should have made that more clear.