What is the balance required in pension fund to provide income of $125,000 each year for 30 years?
I am trying to calculate how much is required in a superannuation/pension fund in order to receive payments of $125,000 each year at retirement. The person will be retired for 30 years once they reach retirement age. I am trying to account for inflation at 2.5% and the fact that the fund has been contributed to from a young age and has an average annual return of 5%.
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I am not sure if the return of 5% if relevant here, or whether I only need to use the 2.5%?
I have been trying: 125000/.025 x [1 – (1/1.025)^30]
Thanks for your help. Just want to check if I am using the right equation or if I am way off track.