Case 2 Calculation of Annual Savings Needed to Meet a Retirement Goal Jessica Amberlin, age 40, single, and from Sacramento, California, is trying to estimate the amount she needs to save annually to meet her retirement needs. Jessica currently earns

$30,000 per year. She expects to need 80 percent of her current salary to live on at retirement. Jessica anticipates that she will receive $800 per month in Social Security benefi ts. Using the Run the Numbers worksheet on page 515, answer the following questions.

(a) What annual income would Jessica need for retirement?

(b) What would her annual expected Social Security benefi t be?

(c) Jessica expects to receive $500 per month from her defi ned-benefi t pension at work. What is her annual benefi t?

(d) How much annual retirement income will she need from savings?

(e) How much will Jessica need to save by retirement in today’s dollars if she plans to retire at age 65 and live to age 90?

(f) Jessica currently has $5000 in a traditional IRA.

Assuming a growth rate of 8 percent, what will be the value of her IRA when she retires?

(g) How much will she still need to save?

(h) What is the amount she needs to save each year to reach this goal?