1. If Michael and Michelle include the receipt of Social Security benefits in their retirement planning, could they retire at age 67 without increasing their annual savings? Assume that at age 67 (in todays dollars) Michaels Social Security benefit would be $29,820 and Michelles would be $14,910. Use Michaels salary only.

2. If the Williamses choose to rely on Social Security benefits in their retirement planning, how much earlier than age 67 can they retire? (Assume all other facts given in Question 8):

STATEMENT OF FINANCIAL POSITION Michael and Michelle Williams January 1, 2011 Assets Liabilities and Net Worth?! Current liabilities JT Cash/cash equivalents Checking account Money market account? (1.75% interest rate) $2,500 5,000 Credit card balances Auto loan (Audi) Auto loan (Toyota) $ 550 25,000 18,000 Total cash/cash equivalents $7,500 Total current liabilities $43,550 Invested assets CD Long-term liabilities Home mortgage Student loans $225,000 50,500 Section 401(k) plan Cash value of life insurance Coin collection Total investments EI3 I $15,000 10,000 6,000 10,000 $41,000 Total long-term liabilities $275,500 Net worth $73,950 Personal use assets House (appraised 7/01/10)* Auto (Toyota) Auto (Audi) Total personal use $275,000 22,500 47,000 $344,500 Total assets $393,000 Total liabilities and net worth $393,000 Note to financial statements 'Assets are stated at fair market value. ?Liabilities are stated at principal only and are all joint obligations except the student loans which belong to Michael. 'The money market account is currently serving as their emergency fund. "Land value was determined to be 550,000 and the home value $225,000. Replacement value of the home is also 5225,000 Title designations JT = Joint tenancy with right of survivorship H = Husband's separate property W = Wife's separate property The Williamses primarily use cash, check, and debit cards for personal expenditures. OPPILLUITS ICXLDOR 7th Edition STATEMENT OF CASH FLOWS Michael and Michelle Williams For the Year Ended December 31, 2010 CASH INFLOWS Salary-Michael Gift from Michael's parents Michelle's self-employment income Interest Total inflows CASH OUTFLOWS $170,000 20,000 4,000 900 $194,900 Section 401(k) plan savings Mortgage payment Property taxes (residence) FICA and self-employment tax Federal income tax withholding State income tax withholding Utilities Disability insurance premium Homeowners insurance Auto notes Auto expense and maintenance Auto insurance Housekeeping service Educational loan repayment Clothing and dry cleaning Food Entertainment Miscellaneous $ 11,900 20,700 1,800 9,021 68,000 6,734 3,980 900 2,000 10,789 1,200 2,400 2,400 6,915 5,600 5,750 3,970 5,998 Total outflows Discretionary cash flow $170,057 $ 24,843 STATEMENT OF FINANCIAL POSITION Michael and Michelle Williams January 1, 2011 Assets Liabilities and Net Worth?! Current liabilities JT Cash/cash equivalents Checking account Money market account? (1.75% interest rate) $2,500 5,000 Credit card balances Auto loan (Audi) Auto loan (Toyota) $ 550 25,000 18,000 Total cash/cash equivalents $7,500 Total current liabilities $43,550 Invested assets CD Long-term liabilities Home mortgage Student loans $225,000 50,500 Section 401(k) plan Cash value of life insurance Coin collection Total investments EI3 I $15,000 10,000 6,000 10,000 $41,000 Total long-term liabilities $275,500 Net worth $73,950 Personal use assets House (appraised 7/01/10)* Auto (Toyota) Auto (Audi) Total personal use $275,000 22,500 47,000 $344,500 Total assets $393,000 Total liabilities and net worth $393,000 Note to financial statements 'Assets are stated at fair market value. ?Liabilities are stated at principal only and are all joint obligations except the student loans which belong to Michael. 'The money market account is currently serving as their emergency fund. "Land value was determined to be 550,000 and the home value $225,000. Replacement value of the home is also 5225,000 Title designations JT = Joint tenancy with right of survivorship H = Husband's separate property W = Wife's separate property The Williamses primarily use cash, check, and debit cards for personal expenditures. OPPILLUITS ICXLDOR 7th Edition STATEMENT OF CASH FLOWS Michael and Michelle Williams For the Year Ended December 31, 2010 CASH INFLOWS Salary-Michael Gift from Michael's parents Michelle's self-employment income Interest Total inflows CASH OUTFLOWS $170,000 20,000 4,000 900 $194,900 Section 401(k) plan savings Mortgage payment Property taxes (residence) FICA and self-employment tax Federal income tax withholding State income tax withholding Utilities Disability insurance premium Homeowners insurance Auto notes Auto expense and maintenance Auto insurance Housekeeping service Educational loan repayment Clothing and dry cleaning Food Entertainment Miscellaneous $ 11,900 20,700 1,800 9,021 68,000 6,734 3,980 900 2,000 10,789 1,200 2,400 2,400 6,915 5,600 5,750 3,970 5,998 Total outflows Discretionary cash flow $170,057 $ 24,843