Planning a Retirement
One useful application of inflation calculations is in planning one's retirement. This is also a comprehensive, real-world example of how interest and inflation can be applied to a long-term financial analysis. As an example, consider Ms. Johnson. She recently turned 34 and is planning to retire at age 65. Considering her other sources of retirement income, she's confident she can live comfortably on an additional $20,000 per year in present-day dollars. She expects to live 10 years beyond her retirement. She assumes that inflation will average 6% per year between now and retirement and that she can make long-term investments at 11% compounded annually. Her retirement question amounts to this:
How much should Ms. Johnson ...
Get Return on Software: Maximizing the Return on Your Software Investment now with the O’Reilly learning platform.
O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.
