What is the projected annual inflation rate?
A lot of people make the mistake of not taking inflation rate into consideration when they try to save up for the future. You have to be aware of this so you’ll more or less have an idea if what you are saving right now would really amount to anything in the future. It is a fact that as time goes by, money loses its value cue to inflation. What you can buy with your 1,000 bucks next year may be significantly less than what you can afford to purchase with it right now. So, once you have all those things factored out. Here’s the formula for the future value (FV): FV = monthly income*(1+projected annual inflation rate) ^ # of years to save ( ^ means raised to the power of ) Example: You are 30 years old now and you want to retire at the age of 55. That leaves you with 25 years to save up. Based on your computation using current prices, you come up with 100,000 monthly income in order for you to live the life that you want if you were to retire today. Let’s say you peg the inflation rate a
