Certified Financial Planner (CFP) Exam 2026 – 400 Free Practice Questions to Pass the Exam

To determine how much Billy must contribute to his company's 401(k) plan in order to achieve a monthly retirement income of $2,000 at age 65, it is important to understand how retirement savings and withdrawals work.

When planning for retirement, it is essential to account for the total amount needed to provide a specific monthly income. In this case, if Billy needs $2,000 monthly, he would require $24,000 annually in retirement. To generate this amount, one typically considers safe withdrawal rates, often around 4% in retirement planning.

Using the 4% rule, to find the total retirement savings needed, you would take the desired annual income and divide it by 0.04. So, for an annual income of $24,000, the calculation would be $24,000 / 0.04, which results in a total retirement savings of $600,000.

To achieve this savings goal, Billy would determine his contribution needs based on factors such as his current age, retirement age, expected rate of return on investments, and the number of years until retirement. Assuming he starts contributing at a certain age and continues to do so until age 65, he would calculate how much he needs to