1. Grady Zebrowski, age 25, just graduated from college, accepted his first job with a $45,000 salary, and is already looking forward to retirement in 40 years. He assumes a 2.3 percent inflation rate and plans to live in retirement for 20 years. He does not want to plan on any Social Security benefits. Assume Grady can earn a 6 percent rate of return on his investments prior to retirement and a 6 percent rate of return on his investments post-retirement to answer the following questions using your financial calculator. a. Grady wants to replace 90 percent of his current net income. What is his annual need in today's dollars? b. Using the table 1, Grady thinks he might have an average tax rate of 13 percent at retirement if he is married. Adjusting for taxes, how much does Grady really need per year, in today's dollars? c. Adjusting for inflation, how much does Grady need per year in future dollars when he begins retirement in 40 years? d. If he needs this amount for 20 years, how much does he need in total for retirement? e. How much does Grady need to save per month to reach his retirement goal assuming he does not receive any employer match on his retirement savings? Click on the table icon to view the FVIF table 2. Click on the table icon to view the PVIFA table 3. Click on the table icon to view the FVIFA table 4. a. Grady's annual need in today's dollars is $ (Round to the nearest dollar.) b. Adjusting for taxes, the amount Grady needs per year, in today's dollars is $ (Round to the nearest dollar.) c. Adjusting for inflation, the amount Grady needs per year in future dollars when he begins retirement in 40 years is (Round to the nearest dollar.) d. Since he needs this amount for 20 years, the total he needs for retirement is $ (Round to the nearest dollar.) e. To reach his retirement goal assuming he does not receive any employer match on his retirement savings, Grady will need to save $ per month. (Round to the nearest dollar.) TABLE 16.2 The Average Tax Rate Average Tax Rate Retirement Income Couples Filing Jointly Individuals $20,000 7% 10% 30,000 10 14 40,000 12 17 50,000 14 20 60,000 17 22 70,000 19 23 80,000 21 24 90,000 22 25 100,000 23 26 150,000 28 30 Note: To estimate your anticipated average tax rate at retirement, you can use the table above based on current tax rates. If you anticipate a change in future tax rates--for example, a flat tax-use that number. 2.00% Compound Sum of $1 (FVIF) n = 20 1.4859 n = 40 2.2080 2.10% 1.5154 2.2963 2.20% 1.5453 2.3880 2.30% 1.5758 2.4833 2.40% 1.6069 2.5822 2.50% 1.6386 2.6851 2.60% 1.6709 2.7919 2.70% 1.7038 2.9028 2.80% 1.7372 3.0180 2.90% 1.7714 3.1377 3.00% 1.8061 3.2620 3.10% 1.8415 3.3911 3.20% 1.8776 3.5252 3.30% 1.9143 3.6645 3.40% 1.9517 3.8091 3.50% 1.9898 3.9593 3.60% 2.0286 4.1152 3.70% 2.0681 4.2771 3.80% 2.1084 4.4452 3.90% 2.1494 4.6198 4.00% 2.1911 4.8010 4.10% 2.2336 4.9892 4.20% 2.2770 5.1845 n = 240 462.0409 6 Monthly Installment Loan Tables ($1,000 loan ith interest payments compounded monthly) n = 480 1991.4907 7 520.9267 2624.8134 8 589.0204 3491.0078 9 667.8869 4681.3203 10 759.3688 6324.0796 11 865.6380 8600.1272 12 989.2554 11764.7725 1.00% nt value of n = 20 18.0456 n = 40 32.8347 1.10% 17.8651 32.2195 1.20% 17.6873 31.6205 1.30% 17.5120 31.0372 1.40% 17.3391 30.4692 1.50% 17.1686 29.9158 1.60% 17.0006 29.3768 1.70% 16.8349 28.8517 1.80% 16.6715 28.3401 1.90% 16.5103 27.8414 2.00% 16.3514 27.3555 2.10% 16.1947 26.8818 2.20% 16.0402 26.4200 2.30% 15.8878 25.9698 2.40% 15.7374 25.5309 2.50% 15.5892 25.1028 2.60% 15.4429 24.6853 2.70% 15.2986 24.2780 2.80% 15.1563 23.8807 2.90% 15.0160 23.4930 3.00% 14.8775 23.1148 3.10% 14.7409 22.7456 3.20% 14.6061 22.3853 3.30% 14.4731 22.0336 3.40% 14.3419 21.6903 3.40% 14.3419 21.6903 3.50% 14.2124 21.3551 3.60% 14.0847 21.0277 3.70% 13.9586 20.7080 3.80% 13.8342 20.3958 3.90% 13.7115 20.0908 4.00% 13.5903 19.7928 4.10% 13.4708 19.5016 4.20% 13.3528 19.2171 4.30% 13.2363 18.9390 4.40% 13.1214 18.6673 4.50% 13.0079 18.4016 4.60% 12.8960 18.1418 4.70% 12.7854 17.8879 4.80% 12.6763 17.6395 4.90% 12.5686 17.3967 5.00% 12.4622 17.1591