Assume same facts as in question 7 except that Robins risk tolerance was sufficient to tolerate a 90% equity and 10% bond portfolio during the accumulation period (pre-retirement). What is the new expected return for the Robin? After they retire, they will still shift to a 60% stock and 40% bond portfolio. What would the new monthly savings requirements be under the new set of assumptions?

Question 7:

Robin is planning for her retirement. She is currently 37 years old and plans to retire at age 62 and live until age 97. Robin currently earns $120,000 per year and anticipates needing 80% of her income during retirement. She anticipates Social Security will provide her with $15,000 per year at age 62, leaving her with required savings to provide $81,000 ($120,000 x 0.80 - $15,000) annually during retirement. She is willing to take some investment risk. Her pre-retirement portfolio will be 80% stocks and 20% bonds and their post retirement portfolio will be 60% stocks and 40% bonds. Large company stocks have averaged 9% annually, and intermediate term government bonds have averaged 5% (please calculate the weighted average expected return of your portfolios). She believes inflation will be 3% per year. How much must Robin save at the end of each year if she wants to make her last savings payment at age 62 to meet her retirement goal?