Anne-Marie and Yancy calculate their current living expenditures to be

$75,000

a year. During retirement they plan to take one cruise a year that will cost

$5,000

in today's dollars. Anne-Marie estimated that their average tax rate in retirement would be

18

percent. Yancy estimated their Social Security income to be about

$24,384

and their retirement benefits are approximately

$35,096.

Use this information to answer the following questions:

a. How much income, in today's dollars, will Anne-Marie and Yancy need in retirement assuming 70 percent replacement and an additional

$5,000

for the cruise?

b. Assuming the

18

percent income tax estimate during retirement, wat is their tax-adjusted need from part a?

c. Calculate their projected annual income shortfall in today's dollars.

d. Determine, in dollars, the future value of the shortfall

28

years from now, assuming an inflation rate of

4

percent.

e. Assuming a nominal rate of return of

7

percent and

23

years in retirement, calculate their necessary annual investment to reach their retirement goals.

1) The pre-tax amount, in today's dollars, that Anne-Marie and Yancy will need in retirement assuming 70 percent replacement and an additional

$

5,000

for the cruise is __?