They believe that this will require $100,000 (nominal – i.e., $100,000 in t=15 dollars) in addition to the equity they will have in their current home. They have already accumulated savings of $200,000 as of today. Beginning at the end of this year, they will save a certain amount, and increase that amount at the inflation rate every year until they retire. The last deposit into savings will be when they are 65. (They can do this because while working they expect their income to increase each year by at least the rate of inflation.) Based on their experience, they believe that they can earn 8.0% per year on savings throughout the entire period (i.e., in their retirement investment fund, not a bank savings
They believe that this will require $100,000 (nominal – i.e., $100,000 in t=15 dollars) in addition to the equity they will have in their current home. They have already accumulated savings of $200,000 as of today. Beginning at the end of this year, they will save a certain amount, and increase that amount at the inflation rate every year until they retire. The last deposit into savings will be when they are 65. (They can do this because while working they expect their income to increase each year by at least the rate of inflation.) Based on their experience, they believe that they can earn 8.0% per year on savings throughout the entire period (i.e., in their retirement investment fund, not a bank savings