Bill and Shirley Hogan, who'd like to retire while they're still relatively young - in about 20 years. Both have promising careers, and both make good money. As a result, they're willing to put aside whatever is necessary to achieve a comfortable lifestyle in retirement. Their current level of household expenditures (excluding savings) is around $75,000 a year, and they expect to spend even more in retirement; they think they'll need about 125% of that amount. (Note: 125% equals a multiplier factor of 1.25). They estimate that their Social Security benefits will amount to $27,000 a year in today's dollars and they'll receive another $34,000 annually from their company pension plans. They feel that future inflation will amount to about 3% a year, and they think they'll be able to earn about 12% on their investments before retirement and about 8% afterward. See Appendix A and Appendix B.

Use Worksheet 14.1 to find out how big their investment nest egg will have to be. Round your answer to the nearest dollar. $ How much they'll have to save annually to accumulate the needed amount within the next 20 years. Round your answer to the nearest dollar. $

worck sheet 14.1

Name(s)							Date
I.	Estimated Household Expenditures in Retirement:
	A.	Approximate number of years to retirement
	B.	Current level of annual household expenditures, excluding savings							$
	C.	Estimated household expenses in retirement as a percent of current
		expenses									%
	D.	Estimated annual household expenditures in retirement (B C)							$ -
II.	Estimated Income in Retirement:
	E.	Social security, annual income							$
	F.	Company/employer pension plans, annual amounts							$
	G.	Other sources, annual amounts							$
	H.	Total annual income (E + F + G)							$ -
	I.	Additional required income, or annual shortfall (D - H)							$ -
III.	Inflation Factor:
	J.	Expected average annual rate of inflation over the period to retirement									%
	K.	Inflation factor (in Appendix A):				Based on	0	years to
		retirement (A) and an expected average
		annual rate of inflation (J) of			0%					1.00
	L.	Size of inflation-adjusted annual shortfall (I K)							$ -
IV.	Funding the Shortfall:
	M.	Anticipated return on assets held after retirement									%
	N.	Amount of retirement funds requiredsize of nest egg (L M)							$ -
	O.	Expected rate of return on investments prior to retirement									%
	P.	Compound interest factor (in Appendix B):
		Based on	0	years to retirement (A) and an expected rate of return
		on investments of		0%						0.0
	Q.	Annual savings required to fund retirement nest egg (N P)							$ -
Note: Parts I and II are prepared in terms of current (todays) dollars.