Lisa is putting together a retirement plan and is scheduled to retire in 32 years. She is planning to open a retirement account and invest an equal amount each month into the retirement account. If she expects to earn 9% per year in the account and is planning to have $2,000,000 in the account at retirement, what is the amount of the monthly investment?

$902.32

Explanation:

The amount that the Lisa should put in her account every month in order to get the sum of $2,000,000 in the account of retirement at the end of 32 years shall be determined through the future value of annuity formula as follows:

Future value of annuity=R[((1+i)^n-1)/i]

In the given question

Future value of annuity=$2,000,000

R= amount that the lisa shall put in her account monthly

i=interest rate compounded monthly=9/12=0.75%

n=number of payments to be made=32*12=384

2,000,000=R[((1+0.75%)^384-1)/0.75%]

R=$902.32

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empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.