Annuity investment?

Question

How much would you have to invest each month in a annuity earning 6% monthly to earn $50,000 at the end of 30 years?

Answer 1

This uses the same formula as the one about making $12 payments.

FV = PMT[((1 + i)ⁿ - 1) / i]

Where:

FV = Future Value of an Ordinary Annuity = $50,000
PMT = Amount of each payment
i = Interest Rate Per Period = 0.06/12 = 0.005 = .5% per month
n = Number of Periods = 30 years × (12 months/year) = 360 weeks

Again, I'm assuming that you mean "6% annually, compounded monthly", or an effective monthly interest rate of 0.5%.

This time we're solving for PMT instead of FV.

$50,000 = PMT[((1 + 0.005)^(360) - 1) / 0.005]

$50,000 = PMT(1,004.515)

PMT = $50,000/1,004.515 = $49.78

So he'd only have to put in a little less than $50 a month to earn $50k after 30 years.

Answer 2

you need to clarify your question as I know of no annuity that makes 6% monthly - if there is, I want in. I suspect that you will have a tough time getting an answer as there are so many unknowns such as inflation, return on investment, etc. If you are looking at an investment amount that will give you a return of $50k per year and the investment has a guaranteed 6% simple interest rate, you are probably looking at somewhere in the $835,000 range. Not sure if that is what you are looking for or not as your question talks about about how much you need to put in rather than receive after 30 years.