Case 1 Estimating Early and Normal Retirement Benefi ts Patrick Dietrick of Murfreesboro, Tennessee, age 37, is single and is making belated plans for his retirement from employment in state government. Based on his family’s medical history he thinks he should base his plan on assuming he will live to age 85.

He wants to maintain his current lifestyle without “scrimping”

but still wants to actively save more for his retirement to take advantage of compounding. Currently, Patrick earns $44,000 per year, with an adjusted gross income of $43,000 and an aftertax income of $33,000. He anticipates receiving $10,000 from Social Security annually and $14,000 per year in a defi nedbenefi t pension upon his retirement at age 67. If he retires at age 62, his pension benefi ts will be lowered to approximately

$11,000. To date, Ben has about $10,000 in investments.

(a) Using the Run the Numbers worksheet on page 515, calculate the additional amount of annual savings that Patrick needs to set aside to reach his goal of retiring at age 62 with 80 percent of his current income.