Continuing Case 43. Retirement Income Forecast
Jamie Lee and Ross, now 57 and still very active, have plenty of time on their hands now that the triplets are away at college. They both realized that time has just flown by; over twenty-four years have passed since they married!
Looking back over the past years, they realized that they have worked hard in their careers, Jamie Lee as the proprietor of a cupcake caf and Ross, self-employed as a web-page designer. They have enjoyed raising their family and strived to be financially sound as they are looking to retirement that is just around the corner. They saved regularly and invested wisely over the years. They rebounded nicely from the economic crisis over the past few years, as they watched their investments closely and adjusted their strategies when they felt it necessary. They purchase vehicles with cash and do not carry credit card balances, choosing instead to use them for convenience only. The triplets are pursuing their masters degrees and have tuition covered through work/study programs at the university.
Jamie Lee and Ross are just a few short years from realizing their goals of retiring at 65 and purchasing a home at the beach!
They are reviewing their financial situation to ensure they will be ready for retirement. They anticipate being able to live comfortably with 80% of their current expenses. The rate of return on their investments until they retire is 4%. They expect this percentage to drop to 3% after retirement. Use this information, along with Exhibit 1-A, Exhibit 1-B, and the information provided below to determine the annual deposit amount Jamie Lee and Ross will need to make until they retire in order to make up the shortfall between their estimated expenses and income needed during retirement. Each answer must have a value for the assignment to be complete. Enter "0" for any unused categories.
Current Expense Amounts (Jamie Lee and Ross Combined)
Fixed expenses: $3,000/month
Variable expenses: $2,000/month
Estimated Income Amounts (Jamie Lee and Ross Combined)
Social Security: $2,100/month
Current IRA balance: $92,000
Estimated IRA withdrawal: $300/month
Other investments: $26,400/year
I need help with BLOCK D, if you could show how you could the answers for part D, it would be greatly appriciated. Thank you!
Please use the charts when needed.
Exhibit 1 -A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods Period 3% 4% 5% 6% 1% 101 2% 102 7% 1,07 103 104 105 1,06 8% 1.08 1.166 2 .04 1.061 - 1.061 1.093 9% 1.09 1.188 1 295 1.412 1.082 1.125 3 126 1.26 1. 021 103 1.041 1.051 1.062 1.072 1.36 5 11% 1.11 1.232 1.368 1.518 1.685 1.87 1.082 1.104 1.126 1.149 1.172 1.103 1.158 1.216 1.276 1.34 1.407 1.477 1.126 1.159 1.194 1.23 1.267 1.469 1.17 1.217 1265 1.316 1.369 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1.689 1.791 1.145 .225 1.311 1.403 1.501 1.606 1718 1.539 1.677 1.587 1.714 1.851 2.076 1.083 2.305 1.838 1.999 1.305 1.344 1.384 1.423 1.48 2.558 2.839 1.426 1.469 1.513 1.558 1.605 3.152 3.498 3.883 4.31 4.785 9 1.094 1.195 1.105 1.219 11 1.116 1243 12 1.127 1.268 131 .138 1294 14 1.149 1.319 151.1611.346 16 1.173 1.373 1.184 1.196 1.428 1.208 1.457 20 122 1.486 25 1 .282 1.641 1.348 1.811 40 1.489 2208 50 1.645 2 692 5.311 1.551 1.629 1.71 1.796 1886 1.98 2079 2.183 2292 2.407 2.527 2653 3.386 4.322 704 11.467 1.539 1.601 1.665 1.732 1.801 1873 1.948 2026 2.107 2.191 2666 3.243 4.801 7.107 10% 1.1 1.21 1.331 1.464 1.611 1.772 1.949 2.144 2.358 2.594 2.853 3.138 3.452 3.797 4.177 4.595 5.054 5.56 6.116 6.727 10.835 17.449 45.259 1 17.391 1.828 1.993 2.172 2.367 2.58 2.813 3.066 3.342 3.642 3.97 4.328 4.717 5.142 5604 8.623 13.268 31.409 7 4.358 1.653 1.967 2.159 2.105 2.332 2.252 2.518 241 2.72 2.579 2.937 .759 3.172 2.952 3.426 3.1593 .7 3.38 3.996 3.617 4.316 387 4661 .427 6 .848 7.612 10.063 14.974 21.725 29.457 46.902 1.898 2.012 2133 2.261 2.3972 2.54 2.693 2854 3.026 3 207 4.292 5 5.743 10.286 18.42 5.895 6.544 1 1.702 1.754 .806 2.094 2.427 3.262 4.384 7.263 8062 13.585 22 892 65.001 184.565 19% 1.19 14% 1.14 1.3 1.482 30% 1.3 15% 1.15 1.323 1.521 1.749 16% 1.16 1.346 1.561 1.811 18% 1.18 1.392 17% 1.17 1.369 1.602 1.416 R 1.69 1.685 1.689 1.874 2.005 20% 1.2 1.44 1.728 2.074 2.488 2.986 3.583 4.3 5.16 25% 1.25 1.563 1.953 2.441 3.052 3.815 4.768 5.96 7.451 2.197 2.856 3.713 1.925 2.011 2.1 2.386 2.84 4.827 2.313 266 2.195 2.502 2.859 3.252 3.379 4.021 6.275 8.157 3.059 3.518 4.785 10.604 3.707 4.046 2.436 2.826 3.278 3.803 4.411 5.117 5.936 6.886 7.988 5.695 13.786 6.777 Period 12% 13% 9 1.12 1.13 2 1.254 1.277 3 1.405 1.443 4 1.574 1.63 5 1.762 1.842 6 1.974 2.082 7 2211 2.353 8 2.476 2.658 9 2 .773 3.004 103 .106 3.395 11 3.479 3.836 123.896 4.335 13 4.363 4.898 14 4.887 5.535 15 5.474 6.254 16 6.13 7.067 17 6.866 7.986 187.699.024 19 8 613 10.197 209.646 11.523 25 17 2 1.231 30 29.96 39.116 40 93.051 1 32.782 50 289.002 4 50736 17.922 4.226 4.818 4.652 5.35 5.492 6.2617 7.138 8.137 6.153 .076 8.137 23.298 30.288 39.374 1.643 1.939 2.288 2.7 3.185 3.759 4.435 5.234 6.176 7.288 8.599 10.147 11.974 14.129 16.672 19.673 23 214 27.393 62.669 143.371 7 50.378 3927 357 2.192 2.565 3.001 3.511 4.108 4.807 5.624 6.58 7.699 9.007 10.539 12.33 14.426 16.879 19.748 23.106 50658 111.065 5 33.869 2566 215 9.266 51.186 66.542 9.358 10.748 9.276 10.761 86.504 6.1929 .313 7.43 11.642 8.916 14.552 10.699 18.19 12.839 22.737 15.407 28.422 18.488 35.527 22.186 44.409 26.623 55.511 3 1.948 69 389 38.338 86.736 95.396 264.698 237.376 807.794 1469.772 7523.164 9100.438 70064.923 12.375 8.064 9.596 11.42 13.59 16.172 19 244 22.901 27252 32.429 7 7.388 184.675 1051.668 5 988.914 12.468 14.463 16.777 16.777 19.461 10.575 12.056 13.743 112.455 14 232 146.192 16.367 190.05 26.462 32.919 4 0.874 66.212 50.95 188.884 7 00233 705.641 2619.996 36118.865 497929 223 85.85 378.721 1670.704 267.864 1083.657 Exhibit 1-B Future Value (Compounded Sum) of $1 Paid In at the End of Each Period for a Given Number of Time Periods (an Annuity) Period 4% 5% 6% 7% 8% 9% 10% 11% 3% 1 1 2 203 2.04 2.06 2.11 3.184 3.091 4.184 3.122 4.246 3.342 4.71 1% 1 201 3.03 4.06 5.101 6.152 .214 8.286 9.369 6.228 7.913 5.416 6.633 7.898 9.214 7 5.309 6.468 7.662 8.892 10.159 7 4.375 5.6375 6.9757 8.394 9.897 11.491 13.181 2.05 3.153 4.31 5.526 6.802 8.142 9.549 11.027 12.578 14.207 15.917 17.713 19.599 21.579 9.783 2. 072.08 3.215 3.246 4.44 4.506 .751 5.867 .153 7.336 8.654 8.923 10.26 10.637 11.978 12.488 13.816 14.487 15.784 16.645 17.888 18.977 10.583 11.859 14. 164 16.722 19.561 10.462 11.464 12.006 11.567 2% 1 2.02 3.06 4.122 5.204 6.308 7.434 8.583 9.755 10.95 12.169 13.412 14.68 15.974 17.293 18.639 20.012 21.412 22.841 24.297 32.03 40.568 60.402 84.579 13.486 22.713 12.683 13.809 14.947 13 26 212 30.095 16.097 17.258 34.405 39.19 2. 0921 3.278 3.31 4.573 4.641 5.985 6.105 7.523 7.716 9.2 9.487 11.028 11.436 13.021 13.579 15.193 15.937 17.56 18.531 20.141 21.384 22.953 24.523 26.019 27.975 29.361 31.772 33.003 35.95 36 974 40.545 41.301 45.599 46.018 51.159 51.16 57 275 84.701 98.347 136.308 164.494 337.882 442.593 815.084 1163.909 12.808 14.192 15.618 17.086 18.599 20.157 21.762 23.414 25.117 26.87 36.459 47.575 75.401 112.797 15.026 16.627 18.292 20.024 21.825 23.698 25 645 27.671 29.778 41.646 56.085 95.026 152.667 14.972 16.87 18.882 21.015 23.276 25.673 28 213 30.906 33.76 36.786 54.865 79.058 154.762 290.336 44.501 50.396 18 18.43 19.615 20.811 22.019 28.243 34.785 48.886 64.463 20.141 22.55 25.129 27.888 30.84 33.999 37 379 40.995 63.249 94.461 1 99.635 406.529 21.495 24.215 27.152 30.324 33.75 37.45 41.446 45.762 7 3.106 113.283 259.057 573.77 19 23.657 25.84 28.132 30.539 33.066 47.727 66.439 120.8 209.348 2017 20 25 56.939 64.203 114.413 199.021 40 581.826 1668.771 50 $ 48,000 Estimated Annual Retirement Living Expenses Estimated annual living expenses if retiring today Number of years until retirement Expected annual rate of return before retirement Future value (use Exhibit 1-A) Projected annual retirement living expenses, adjusted for inflation 4% x (A) $ 1.369 65,691.31 Estimated Annual Income at Retirement Social Security income Company pension, personal retirement account income Investment and other income Total retirement income $ $ 25,200 3,600 26,400 55,200 (B) $ (C) $ 10,491.31 Annual shortfall of income after retirement (A-B) Expected years in retirement Expected annual rate of return before retirement Expected annual rate of return on invested funds after retirement Future value for a series of deposits (use Exhibit 1-B) Annual deposit required to accumulate the amount needed Exhibit 1 -A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods Period 3% 4% 5% 6% 1% 101 2% 102 7% 1,07 103 104 105 1,06 8% 1.08 1.166 2 .04 1.061 - 1.061 1.093 9% 1.09 1.188 1 295 1.412 1.082 1.125 3 126 1.26 1. 021 103 1.041 1.051 1.062 1.072 1.36 5 11% 1.11 1.232 1.368 1.518 1.685 1.87 1.082 1.104 1.126 1.149 1.172 1.103 1.158 1.216 1.276 1.34 1.407 1.477 1.126 1.159 1.194 1.23 1.267 1.469 1.17 1.217 1265 1.316 1.369 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1.689 1.791 1.145 .225 1.311 1.403 1.501 1.606 1718 1.539 1.677 1.587 1.714 1.851 2.076 1.083 2.305 1.838 1.999 1.305 1.344 1.384 1.423 1.48 2.558 2.839 1.426 1.469 1.513 1.558 1.605 3.152 3.498 3.883 4.31 4.785 9 1.094 1.195 1.105 1.219 11 1.116 1243 12 1.127 1.268 131 .138 1294 14 1.149 1.319 151.1611.346 16 1.173 1.373 1.184 1.196 1.428 1.208 1.457 20 122 1.486 25 1 .282 1.641 1.348 1.811 40 1.489 2208 50 1.645 2 692 5.311 1.551 1.629 1.71 1.796 1886 1.98 2079 2.183 2292 2.407 2.527 2653 3.386 4.322 704 11.467 1.539 1.601 1.665 1.732 1.801 1873 1.948 2026 2.107 2.191 2666 3.243 4.801 7.107 10% 1.1 1.21 1.331 1.464 1.611 1.772 1.949 2.144 2.358 2.594 2.853 3.138 3.452 3.797 4.177 4.595 5.054 5.56 6.116 6.727 10.835 17.449 45.259 1 17.391 1.828 1.993 2.172 2.367 2.58 2.813 3.066 3.342 3.642 3.97 4.328 4.717 5.142 5604 8.623 13.268 31.409 7 4.358 1.653 1.967 2.159 2.105 2.332 2.252 2.518 241 2.72 2.579 2.937 .759 3.172 2.952 3.426 3.1593 .7 3.38 3.996 3.617 4.316 387 4661 .427 6 .848 7.612 10.063 14.974 21.725 29.457 46.902 1.898 2.012 2133 2.261 2.3972 2.54 2.693 2854 3.026 3 207 4.292 5 5.743 10.286 18.42 5.895 6.544 1 1.702 1.754 .806 2.094 2.427 3.262 4.384 7.263 8062 13.585 22 892 65.001 184.565 19% 1.19 14% 1.14 1.3 1.482 30% 1.3 15% 1.15 1.323 1.521 1.749 16% 1.16 1.346 1.561 1.811 18% 1.18 1.392 17% 1.17 1.369 1.602 1.416 R 1.69 1.685 1.689 1.874 2.005 20% 1.2 1.44 1.728 2.074 2.488 2.986 3.583 4.3 5.16 25% 1.25 1.563 1.953 2.441 3.052 3.815 4.768 5.96 7.451 2.197 2.856 3.713 1.925 2.011 2.1 2.386 2.84 4.827 2.313 266 2.195 2.502 2.859 3.252 3.379 4.021 6.275 8.157 3.059 3.518 4.785 10.604 3.707 4.046 2.436 2.826 3.278 3.803 4.411 5.117 5.936 6.886 7.988 5.695 13.786 6.777 Period 12% 13% 9 1.12 1.13 2 1.254 1.277 3 1.405 1.443 4 1.574 1.63 5 1.762 1.842 6 1.974 2.082 7 2211 2.353 8 2.476 2.658 9 2 .773 3.004 103 .106 3.395 11 3.479 3.836 123.896 4.335 13 4.363 4.898 14 4.887 5.535 15 5.474 6.254 16 6.13 7.067 17 6.866 7.986 187.699.024 19 8 613 10.197 209.646 11.523 25 17 2 1.231 30 29.96 39.116 40 93.051 1 32.782 50 289.002 4 50736 17.922 4.226 4.818 4.652 5.35 5.492 6.2617 7.138 8.137 6.153 .076 8.137 23.298 30.288 39.374 1.643 1.939 2.288 2.7 3.185 3.759 4.435 5.234 6.176 7.288 8.599 10.147 11.974 14.129 16.672 19.673 23 214 27.393 62.669 143.371 7 50.378 3927 357 2.192 2.565 3.001 3.511 4.108 4.807 5.624 6.58 7.699 9.007 10.539 12.33 14.426 16.879 19.748 23.106 50658 111.065 5 33.869 2566 215 9.266 51.186 66.542 9.358 10.748 9.276 10.761 86.504 6.1929 .313 7.43 11.642 8.916 14.552 10.699 18.19 12.839 22.737 15.407 28.422 18.488 35.527 22.186 44.409 26.623 55.511 3 1.948 69 389 38.338 86.736 95.396 264.698 237.376 807.794 1469.772 7523.164 9100.438 70064.923 12.375 8.064 9.596 11.42 13.59 16.172 19 244 22.901 27252 32.429 7 7.388 184.675 1051.668 5 988.914 12.468 14.463 16.777 16.777 19.461 10.575 12.056 13.743 112.455 14 232 146.192 16.367 190.05 26.462 32.919 4 0.874 66.212 50.95 188.884 7 00233 705.641 2619.996 36118.865 497929 223 85.85 378.721 1670.704 267.864 1083.657 Exhibit 1-B Future Value (Compounded Sum) of $1 Paid In at the End of Each Period for a Given Number of Time Periods (an Annuity) Period 4% 5% 6% 7% 8% 9% 10% 11% 3% 1 1 2 203 2.04 2.06 2.11 3.184 3.091 4.184 3.122 4.246 3.342 4.71 1% 1 201 3.03 4.06 5.101 6.152 .214 8.286 9.369 6.228 7.913 5.416 6.633 7.898 9.214 7 5.309 6.468 7.662 8.892 10.159 7 4.375 5.6375 6.9757 8.394 9.897 11.491 13.181 2.05 3.153 4.31 5.526 6.802 8.142 9.549 11.027 12.578 14.207 15.917 17.713 19.599 21.579 9.783 2. 072.08 3.215 3.246 4.44 4.506 .751 5.867 .153 7.336 8.654 8.923 10.26 10.637 11.978 12.488 13.816 14.487 15.784 16.645 17.888 18.977 10.583 11.859 14. 164 16.722 19.561 10.462 11.464 12.006 11.567 2% 1 2.02 3.06 4.122 5.204 6.308 7.434 8.583 9.755 10.95 12.169 13.412 14.68 15.974 17.293 18.639 20.012 21.412 22.841 24.297 32.03 40.568 60.402 84.579 13.486 22.713 12.683 13.809 14.947 13 26 212 30.095 16.097 17.258 34.405 39.19 2. 0921 3.278 3.31 4.573 4.641 5.985 6.105 7.523 7.716 9.2 9.487 11.028 11.436 13.021 13.579 15.193 15.937 17.56 18.531 20.141 21.384 22.953 24.523 26.019 27.975 29.361 31.772 33.003 35.95 36 974 40.545 41.301 45.599 46.018 51.159 51.16 57 275 84.701 98.347 136.308 164.494 337.882 442.593 815.084 1163.909 12.808 14.192 15.618 17.086 18.599 20.157 21.762 23.414 25.117 26.87 36.459 47.575 75.401 112.797 15.026 16.627 18.292 20.024 21.825 23.698 25 645 27.671 29.778 41.646 56.085 95.026 152.667 14.972 16.87 18.882 21.015 23.276 25.673 28 213 30.906 33.76 36.786 54.865 79.058 154.762 290.336 44.501 50.396 18 18.43 19.615 20.811 22.019 28.243 34.785 48.886 64.463 20.141 22.55 25.129 27.888 30.84 33.999 37 379 40.995 63.249 94.461 1 99.635 406.529 21.495 24.215 27.152 30.324 33.75 37.45 41.446 45.762 7 3.106 113.283 259.057 573.77 19 23.657 25.84 28.132 30.539 33.066 47.727 66.439 120.8 209.348 2017 20 25 56.939 64.203 114.413 199.021 40 581.826 1668.771 50 $ 48,000 Estimated Annual Retirement Living Expenses Estimated annual living expenses if retiring today Number of years until retirement Expected annual rate of return before retirement Future value (use Exhibit 1-A) Projected annual retirement living expenses, adjusted for inflation 4% x (A) $ 1.369 65,691.31 Estimated Annual Income at Retirement Social Security income Company pension, personal retirement account income Investment and other income Total retirement income $ $ 25,200 3,600 26,400 55,200 (B) $ (C) $ 10,491.31 Annual shortfall of income after retirement (A-B) Expected years in retirement Expected annual rate of return before retirement Expected annual rate of return on invested funds after retirement Future value for a series of deposits (use Exhibit 1-B) Annual deposit required to accumulate the amount needed
