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 todayâsdollars 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 todayâs dollars.
d. None of the above will help himachieve his goals.
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 todayâsdollars 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 todayâs dollars.
d. None of the above will help himachieve his goals.
