Annual Income = $ 50,000

Income required at Retirement = 80%

Years of Retirement Income = 14

$50,000 * 80% = $40,000

$40,000 / 12 months = $3,333.33 monthly spending

Question:

A. In today's dollars what is monthly spending?

B. Using an average inflation rate of 4% per year, what is the amount need at time of retirement (14 years) in order to buy the same amount?

C. Assume your retirement account will grow at a steady rate of 7% per year. What's the present value of your retirement income? That is, the "=pv (" result, using that 7% with your answer to "B" plus $1,250 (social security), and with 28 years of retirement?