The future value (FV) or your accumulation for retirement after 40 years would be $414,707.

PROBLEM:

Most people would find it difficult and time consuming to utilize this formula or even have a Financial Calculator and the expertise that would allow them to easily and quickly perform the calculation.

SOLUTION:

The MORTGAGE2 PRO software will allow you to generate a negative amortization schedule which is a unique way of having a grid of sinking fund calculations.

Run the program (see screenshot 2), then change the default calculator values in the green calculator portion at the top of the screen to one payment per year and the compounding to annual compounding. Change the interest rate to 3%, press the Tab key, change the amortization period to 40 years, press the Tab key change the payment to 5500. Now using the mouse left click on the word Principal (the prompt in front of that calculator input box) and the value in the box will change to 127,131.25 (that is the PV, present value .. but more on that later).

You now have a blended payment amortization schedule below the calculator is in a spread sheet format (grid). Using the mouse click on the first payment box in the SPREADSHEET (Grid), it turns yellow, type in 0 and press Enter or Tab. Now copy the value of Zero all the way down to payment 40. In the balance column you will see a value of $414,706.94 This is the future value of $5500 each year growing at 3% compounded annually for 40 years. This is called the Future Value, FV. The PF/FV window overlapping the Grid is merely to show that a single calculation is also possible and yields the same numbers. However the value of the Grid of FVs is that you can change the interest rate (growth) for each and every one of the forty years to reflect reality. Doing these calculations manually would be time consuming and prone to error.