If the average annual inflation rate is 3.5%, how much will you need in 25 years to maintain the same lifestyle costing $60,000 today?

To determine how much you will need in the future to maintain the same lifestyle, you must account for inflation, which affects the purchasing power of money over time. The average annual inflation rate of 3.5% indicates that prices will rise, and thus, the same amount of money will buy fewer goods and services in the future than it does today.

To find the future value needed to cover an expense of $60,000 today after 25 years of inflation at 3.5%, you can use the formula for future value based on inflation:

Future Value = Present Value x (1 + inflation rate) ^ number of years

Applying the values:

• Present Value = $60,000

• Inflation Rate = 3.5%, or 0.035 as a decimal

• Number of Years = 25

Using the formula, you calculate:

Future Value = $60,000 x (1 + 0.035) ^ 25

Calculating that gives you:

Future Value = $60,000 x (1.035) ^ 25

Future Value = $60,000 x 2.295

This equals approximately $137,700. However, when considering rounding and variations in method, you would