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Parker is 50 and wants to retire in 15 years. His family has ahistory of living well into their 90s. Therefore, he estimates thathe will live to age 95. He currently has a salary of $120,000 andexpects that he will need about 65% of that amount annually if hewere retired. He can earn 9 percent in his portfolio while he isworking. However, he expects that he will only earn 7 percent inhis portfolio during retirement. He expects inflation to continueat 3 percent. Parker currently has $350,000 invested for hisretirement. His Social Security benefit in today’s dollars is$30,000 per year at normal age retirement of age 67. His SocialSecurity benefit will be reduced by 6 2/3 percent for each year hebegins collecting before full age retirement. How much does he needto save each year to meet his retirement goals?

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Keith Leannon
Keith LeannonLv2
28 Sep 2019

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Larry is 58 and wants to retire by age 65. He expects that hewill live to age 95. He currently has a salary of $140,000 andexpects that he will need about 72% of that amount annually if hewere retired. He can earn 9 percent in his portfolio while he isworking. However, he expects that he will only earn 7 percent inhis portfolio during retirement because he will adjust his assetallocation so that his portfolio is more conservative. He expectsinflation to continue at 3 percent. Larry currently has $800,000invested for his retirement. His Social Security benefit in today’sdollars is $24,000 per year, assuming a retirement of age 65. Hejust calculated what he needs to save each year and it is more thanhe can afford. How will the following alternative affect hisretirement plans (show your work):

a. Modify his portfolio duringretirement to achieve an 8% rate of return instead of a 7% rate ofreturn.

b. Delay his retirement by 2years.

c. Reduce his expected needs by$10,000 in today’s dollars.

d. None of the above will help himachieve his goals.

Assume that your father is now 50 years old, plans to retire in10 years, and expects to live for 25 years after he retires - thatis, until age 85. He wants his first retirement payment to have thesame purchasing power at the time he retires as $50,000 has today.He wants all of his subsequent retirement payments to be equal tohis first retirement payment. (Do not let the retirement paymentsgrow with inflation: Your father realizes that if inflation occursthe real value of his retirement income will decline year by yearafter he retires). His retirement income will begin the day heretires, 10 years from today, and he will then receive 24additional annual payments. Inflation is expected to be 6% per yearfrom today forward. He currently has $100,000 saved and expects toearn a return on his savings of 7% per year with annualcompounding. To the nearest dollar, how much must he save duringeach of the next 10 years (with equal deposits being made at theend of each year, beginning a year from today) to meet hisretirement goal? (Note: Neither the amount he saves nor the amounthe withdraws upon retirement is a growing annuity.)

An individual is now 50 years old, that he plans to retire in 10 years, and that he expects to live for 25 years after he retires, that is, until he is 85. He wants a fixed annual retirement income of $65,156. His retirement income will begin the day he retires, 10 years from today, and he will then get 24 additional annual payments. He currently has $100,000 saved up; and he expects to earn a return on his savings of 8 percent per year, annual compounding. To the nearest dollar, how much must he save during each of the next 10 years (with deposits being made at the end of each year) to meet his retirement goal?

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