1. Apply What You've Learned - Retirement and Estate Planning Scenario: You and your spouse are both 40 years old. You earn $55,000 and your spouse earns $35,000 per year. You estimate you can live comfortably on a minimum of 75% of your combined salaries in retirement, but hope to achieve more than that. You both plan to retire at age 62 and move to a warmer climate. You've changed jobs three times already in your career. With your first employer, you are vested in a defined-benefit plan with a fixed monthly payment of $315 if you begin taking benefits at age 62. With your second employer, you had a 401(k) that you rolled into an IRA that is now valued at $30,000. With your current employer, you have a 401(k) that is valued at $11,000. Your spouse has a 401(k) that is currently worth $10,500. You assume you will both live 20 years beyond retirement. Your current expectation is that together, you and your spouse, will require a minimum annual income of dollars). in retirement (in today's For individuals born in 1960 or later, the full-benefit retirement age is y years of age. If you and your spouse decide to retire prior to this age, your basic retirement benefit will be permanently by V per year for each year that you retire early. This means that if you elect to retire before the full-benefit retirement age, you and your spouse will lose a total of V of your expected Social Security benefits. Use the table below to estimate your and your spouse's expected annual Social Security benefits. Present annual earnings $35,000 $45,000 $55,000 $75,000 Full-benefit annual retirement benefits $17,160 $20,400 $22,800 $27,240 Given the data in the table above, if you and your spouse retire at your full-benefit age, you should expect to receive per year, while your spouse should expect to receive each year. This would result in a combined annual Social Security benefit income of However, if you and your spouse elected to retire at age 62, then your and your spouse's expected Social Security benefits will be respectively. Your combined Social Security retirement income is expected to total and According to the terms of your defined-benefit retirement account, you expect to receive a total income of of your minimum annual retirement income. per year, which is equal to You and your spouse's combined IRA and 401(k) accounts are currently worth Assuming that you and your spouse both retire at age 62, these three accounts will need to generate of additional income each year to achieve your desired minimum annual retirement income. Assume that: 1. Your three IRA and 401(k) accounts can produce sufficient income, over that generated by your combined Social Security benefits and your defined-benefit retirement account, to achieve your desired minimum annual retirement income. 2. You and your spouse will live 20 years after you both retire (at age 62) and your IRA and 401(k) accounts will continue to earn 6% after you begin to make your annual withdrawals. How much money will you need in your three IRA and 401(k) investments (combined) at the time you both retire to have sufficient income to last the rest of your lives? (Note: The appropriate present value interest factor for 6% and 20 years is 11.4699.) $767,910 $590,700 $945,120 $472,560 If you and your spouse do not make any more contributions into your retirement accounts but the account balances grow at a rate of 6% per year, then your three IRA and 401(k) accounts will be worth a total of when you and your spouse are 62 years of age. (Note: The appropriate future value interest factor at 6% and 22 years is 3.6035.) 1. Apply What You've Learned - Retirement and Estate Planning Scenario: You and your spouse are both 40 years old. You earn $55,000 and your spouse earns $35,000 per year. You estimate you can live comfortably on a minimum of 75% of your combined salaries in retirement, but hope to achieve more than that. You both plan to retire at age 62 and move to a warmer climate. You've changed jobs three times already in your career. With your first employer, you are vested in a defined-benefit plan with a fixed monthly payment of $315 if you begin taking benefits at age 62. With your second employer, you had a 401(k) that you rolled into an IRA that is now valued at $30,000. With your current employer, you have a 401(k) that is valued at $11,000. Your spouse has a 401(k) that is currently worth $10,500. You assume you will both live 20 years beyond retirement. Your current expectation is that together, you and your spouse, will require a minimum annual income of dollars). in retirement (in today's For individuals born in 1960 or later, the full-benefit retirement age is y years of age. If you and your spouse decide to retire prior to this age, your basic retirement benefit will be permanently by V per year for each year that you retire early. This means that if you elect to retire before the full-benefit retirement age, you and your spouse will lose a total of V of your expected Social Security benefits. Use the table below to estimate your and your spouse's expected annual Social Security benefits. Present annual earnings $35,000 $45,000 $55,000 $75,000 Full-benefit annual retirement benefits $17,160 $20,400 $22,800 $27,240 Given the data in the table above, if you and your spouse retire at your full-benefit age, you should expect to receive per year, while your spouse should expect to receive each year. This would result in a combined annual Social Security benefit income of However, if you and your spouse elected to retire at age 62, then your and your spouse's expected Social Security benefits will be respectively. Your combined Social Security retirement income is expected to total and According to the terms of your defined-benefit retirement account, you expect to receive a total income of of your minimum annual retirement income. per year, which is equal to You and your spouse's combined IRA and 401(k) accounts are currently worth Assuming that you and your spouse both retire at age 62, these three accounts will need to generate of additional income each year to achieve your desired minimum annual retirement income. Assume that: 1. Your three IRA and 401(k) accounts can produce sufficient income, over that generated by your combined Social Security benefits and your defined-benefit retirement account, to achieve your desired minimum annual retirement income. 2. You and your spouse will live 20 years after you both retire (at age 62) and your IRA and 401(k) accounts will continue to earn 6% after you begin to make your annual withdrawals. How much money will you need in your three IRA and 401(k) investments (combined) at the time you both retire to have sufficient income to last the rest of your lives? (Note: The appropriate present value interest factor for 6% and 20 years is 11.4699.) $767,910 $590,700 $945,120 $472,560 If you and your spouse do not make any more contributions into your retirement accounts but the account balances grow at a rate of 6% per year, then your three IRA and 401(k) accounts will be worth a total of when you and your spouse are 62 years of age. (Note: The appropriate future value interest factor at 6% and 22 years is 3.6035.)