Continuing Case 43. Retirement Income Forecast: please show steps

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

Please use correcsponding exhibit a/b charts to answer. thank you

Answer is not complete. $ 48,000 8 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% 1.369 (A) $ 65,691.31 Estimated Annual Income at Retirement Social Security income Company pension, personal retirement account income Investment and other income Total retirement income EA EA EA 25,200 3,600 26,400 55,200 (B) $ (C) $ 10,491.31 8 X 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 4% 3% (D) 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 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 2 2.03 205 2.06 207 2.09 2.09 2.11 3.342 3.153 3.215 202 3.05 4.122 5204 3.091 4.184 201 3.03 4.06 5101 6.152 .214 204 3.122 4.246 5416 4.31 3.184 4.375 5637 3.245 4.505 5867 2.1 3.31 4.641 6106 3.278 4573 5985 4.71 6 5526 6751 6228 6 6.308 6.633 6.802 6.975 7.153 7.335 7.716 7 913 5309 6.468 7.662 B.192 7.523 9.2 7 7 8.142 8.394 8.654 9.783 7.434 9.583 9.487 1 1436 B 8.206 9.214 9549 9.097 10 26 11.026 11.059 9 9 .369 9.755 10.583 11.027 11.191 11.978 14.161 13 816 10 11 10.462 11.567 10.95 12.169 10.159 11.454 12.808 14 192 12.006 13.486 12.578 14.207 15 917 13.021 15.193 17.56 175 13.579 15.937 18.531 16.722 19.561 22713 13 412 10.637 12.489 14.487 16.645 18 977 21.495 24.215 27.152 30.324 14.68 15.618 16.627 26.212 17.066 18.292 30.095 18.181 14.972 1687 18.882 21.015 23 276 25.673 28.213 30.906 3376 20141 22.953 26.019 20 361 33.003 17.713 19.599 21.579 23.657 25.84 28.132 30 539 15.784 17 898 20.141 22.55 25.129 27 898 30.84 33.999 37 379 12 12 683 13 13.809 14.947 15 16.097 16 17.258 17 18.43 19.615 1920811 20 22.019 25 28.243 30 34.705 40 18.886 50 64.463 21 394 24.523 27.975 31.772 35.96 15.974 17.293 19.639 20.012 21.412 22 941 34.405 39.19 36.974 41.301 40.545 45.599 1 159 44.501 50.396 56 929 5 1 .599 20.157 21.762 23.414 25 117 25.87 36.459 47.575 7 5401 112.797 20.024 21.825 23.698 25.645 27 671 29.778 41.646 56.005 96026 152.667 64.203 24.297 32.03 40.569 6 0:402 84.579 33.065 47.727 66.439 1 20.9 209.343 36.786 54.865 79.056 154.762 290.336 40.995 63.249 94.461 199.636 406.529 33.75 37.45 41 446 45.762 73.105 113 263 259,057 573.77 46 018 51.16 84.701 136 300 337 982 815.084 57.275 98.347 164.494 412.583 1163.909 114.413 199.021 581.825 1668.771 Period 12% 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 2 2 .12 2.13 2.14 2.15 2.16 2.18 2.19 22 23 2.17 3.639 3 3.374 3.44 3.473 3.505 3.64 3.407 465 3.572 5.215 225 3.813 5.766 3.99 6.187 4 4.779 5.141 5.368 4.921 661 5.066 6877 6 6 742 9043 6 8 6353 .115 10.089 12.3 8.323 10.405 12.757 15:116 12.756 17.583 7 B 3.605 5.291 7297 9.683 12.523 15 902 19.923 8.536 10.73 13 233 16.085 19.337 23.045 8.754 11.067 13.727 16.786 20.304 24349 11.414 1424 17.519 - 7442207 11.259 12.916 15.073 16 490 19.142 20.799 25.802 70147 154 9.207 9.442 11.772 12.142 14.773 15.327 18.285 19.096 22.993 23.521 27.2 28.755 23.850 9 1 4.776 32.015 10 17.549 10.42 24.709 21.321 25.733 42.619 56.405 11 20.656 21.814 25.900 32.15 39 581 30.404 33.253 42.566 54208 68.76 25 65 32 924 74327 27 271 32.089 29 002 3 4.352 29.985 97.625 12 13 14 15 16 24 133 28.029 32.393 3720 12.753 34.383 40 417 34 931 42.219 50.818 60.965 37.581 43.842 30 85 35.785 43.672 51 GS 60.925 4 0.505 47.58 39.404 47.103 56.11 66.649 16.672 72.999 17 48.884 71,673 53.789 61.725 70 749 84.141 50.98 59.118 68.394 78 969 91.025 181.871 3 56.787 18 19 20 25 30 3719 45.244 54.841 66.261 79.85 95.022 115.265 139 166 1 65.418 402.042 966 712 56.717 66.075 75.836 98 212 102.444 212.793 434.745 55.75 6 3 44 72.052 133.334 2 41.333 48.497 59.196 72035 87.442 105.931 128. 117 154 74 186.688 471.981 1161.982 78.979 93.406 110 285 130.033 292.105 647.439 8 7.058 103.74 123 414 146.628 342.603 790.948 86.949 109.607 138.109 173.636 218.045 272 556 342.945 1054.791 3227.174 127.913 167 206 218.472 285.014 371.518 483 973 630.165 2 348.803 9729.965 99 603 115.38 249.214 530 312 80.947 155.62 2 93. 199 40 50 767 091 2400.018 1 013.704 3 459.507 1 342 025 4994.521 1779.09 7217.716 2360.757 10485.649 3 131.522 15089.502 4163 213 21813.094 5629.829 31515.335 7343.868 45497.191 30098 656 280256.698 120392 883 1699760.743 Exhibit 1 -A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods 3% Period 1 2 5% 1.05 6% 1.06 7% 1. 07 8% .00 9% 1.09 1.03 1 1 1 1% .01 .02 1.03 1041 1.103 1.124 11% .11 1.232 363 1.145 2% 1.02 101 1,061 1 082 1.104 1.188 4% 1.04 1.082 1.125 117 1.217 1.061 1.093 10% 1. 1 1 1.21 1.3311 1464 1.158 1.166 1.25 136 1295 1.225 1311 1.191 1 262 1.338 1 216 1412 1 126 1.159 1518 1.051 1.276 1.403 1.469 1.539 1.611 1 585 1.126 1.265 1 34 1419 1.501 1.587 1.772 1.87 1062 1072 1.149 1.316 1.407 1.606 1.714 1.949 2.076 1004 1.594 1.083 1.172 1.359 1.477 1.718 2.144 2.305 1.194 1.23 1.267 1.305 1.344 1.384 1.423 1.689 1.836 2356 2.550 1 094 1.105 1.116 1561 1.629 1.48 1.195 1.219 1 243 1 268 1.791 1698 1.567 2.105 1.677 1.828 1.998 2172 2.367 2.58 2813 3.056 3.342 3.642 1.851 1.9999 2.159 2.332 2518 2.72 2.937 2.839 3.152 1.539 1.71 1.127 426 1 601 1 796 2012 2 252 3499 131 .138 1.294 1.469 1.665 1.886 2.133 2.41 2 594 2853 3.138 3.452 3797 4.177 4.595 5.064 3.883 4.31 14 1.149 1.319 1.513 1.732 1 08 2261 15 1.161 1.558 2079 2.397 4.785 1.345 1.373 2.579 2.759 2.952 3.159 1.801 1.673 1948 1.173 1184 5.311 1.605 1663 1.702 2.183 2292 3.172 3.425 37 3.995 3.97 4328 5895 1.196 1.428 2.026 2.407 3.38 4.717 5.56 6.544 1.208 1.457 1.754 2. 107 2 527 3.617 4316 5.142 6 116 7 263 12 1.486 1 805 2.191 2.653 2.54 2693 2.854 3026 3.207 4.292 5743 10.286 18.42 3.87 4.661 5.604 6.727 8052 1.282 1.641 3.385 5.427 6.8438 .623 13.585 1348 2.094 2427 3.262 4.384 2.656 2 243 4.801 7.107 1911 2.208 692 40 50 1.489 1.645 10.835 17 449 45.259 117.391 7612 14.974 29.457 7.04 11.467 10063 21.725 45.902 18 268 31.409 7 4.358 65.001 184.565 50 2 Period T 13% 1.15 1277 1.443 12% 1.12 .251 1.405 1.574 15% 1.15 1.323 1.521 14% 1.14 13 1.482 1.62g 16% 1.16 1.316 17% 1.17 1.369 1.602 18% 1.18 1392 19% 119 1.416 20% 12 1.44 25% 1.25 1.563 2 30% 1.3 1.69 2.197 1 3 1.551 1.685 1.728 1.953 1.643 1939 1749 1.611 1874 2005 2074 2.441 2 856 5 1.762 1.925 2.488 2.1 2.436 3.052 3.815 6 1.974 2002 2.353 2.011 2.313 2.66 3.059 3.510 2.965 3.583 2826 2211 2.476 2.773 2.192 2.565 3.001 3.511 4.100 2.195 2.502 2.353 3252 4758 2.386 2.84 3.379 4.021 4705 2.288 27 3.185 3.759 4.435 5.234 3.713 4.627 6.275 8.157 10 604 3.278 4.3 5.96 2.658 3004 3.395 3 803 7.451 5.16 6.192 103 3.707 4046 4.411 4.807 5.695 9313 1 3.786 .105 3.479 3 AOS 3.836 4.226 4.652 5 117 6.176 6 777 7.43 11.642 5.624 658 17.922 23 298 12 4 325 4 818 535 6.936 7288 8064 9916 14562 4.363 4.898 5.492 6.153 6.886 7.699 8.599 9.596 10.699 30.288 4.867 7076 7.908 10.147 11.42 39.374 5.535 6 254 7.067 12.839 15.407 8.137 18.19 22.737 28.422 35.527 9 9.007 10.539 12.33 5.474 6.13 11.974 6.261 7.138 8.137 9276 13.59 .256 10.748 14.129 9.358 261 16.172 19 244 18.488 22 186 51.186 66.542 86 504 7 086 1 2 468 14.426 16 672 44409 9.024 10.575 16.879 25.623 7.69 8.613 12.375 14.232 14.463 16.777 10.197 16.367 19.461 25 30 40 50 9.646 17 2995 93.051 289.002 11.523 2 1.231 29.116 132.782 450.736 12.056 13.743 26.462 5095 188.884 700.233 32.919 66 212 267.864 1083.657 4 0.874 85 95 378.721 1670.704 19.748 23.106 50.658 111065 533.869 2566 215 19.673 23.214 27.393 6 2.669 143.871 750.373 3927.357 22.901 27252 32.429 7 7.888 184.675 1051.558 5 988.914 31.948 39.339 95.396 237 376 1469.772 9100.438 56.511 69.389 96.736 254.698 807 704 7523.164 70064.923 112.455 146.192 190.05 705.641 2619 996 36118.865 497929 223 Answer is not complete. $ 48,000 8 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% 1.369 (A) $ 65,691.31 Estimated Annual Income at Retirement Social Security income Company pension, personal retirement account income Investment and other income Total retirement income EA EA EA 25,200 3,600 26,400 55,200 (B) $ (C) $ 10,491.31 8 X 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 4% 3% (D) 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 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 2 2.03 205 2.06 207 2.09 2.09 2.11 3.342 3.153 3.215 202 3.05 4.122 5204 3.091 4.184 201 3.03 4.06 5101 6.152 .214 204 3.122 4.246 5416 4.31 3.184 4.375 5637 3.245 4.505 5867 2.1 3.31 4.641 6106 3.278 4573 5985 4.71 6 5526 6751 6228 6 6.308 6.633 6.802 6.975 7.153 7.335 7.716 7 913 5309 6.468 7.662 B.192 7.523 9.2 7 7 8.142 8.394 8.654 9.783 7.434 9.583 9.487 1 1436 B 8.206 9.214 9549 9.097 10 26 11.026 11.059 9 9 .369 9.755 10.583 11.027 11.191 11.978 14.161 13 816 10 11 10.462 11.567 10.95 12.169 10.159 11.454 12.808 14 192 12.006 13.486 12.578 14.207 15 917 13.021 15.193 17.56 175 13.579 15.937 18.531 16.722 19.561 22713 13 412 10.637 12.489 14.487 16.645 18 977 21.495 24.215 27.152 30.324 14.68 15.618 16.627 26.212 17.066 18.292 30.095 18.181 14.972 1687 18.882 21.015 23 276 25.673 28.213 30.906 3376 20141 22.953 26.019 20 361 33.003 17.713 19.599 21.579 23.657 25.84 28.132 30 539 15.784 17 898 20.141 22.55 25.129 27 898 30.84 33.999 37 379 12 12 683 13 13.809 14.947 15 16.097 16 17.258 17 18.43 19.615 1920811 20 22.019 25 28.243 30 34.705 40 18.886 50 64.463 21 394 24.523 27.975 31.772 35.96 15.974 17.293 19.639 20.012 21.412 22 941 34.405 39.19 36.974 41.301 40.545 45.599 1 159 44.501 50.396 56 929 5 1 .599 20.157 21.762 23.414 25 117 25.87 36.459 47.575 7 5401 112.797 20.024 21.825 23.698 25.645 27 671 29.778 41.646 56.005 96026 152.667 64.203 24.297 32.03 40.569 6 0:402 84.579 33.065 47.727 66.439 1 20.9 209.343 36.786 54.865 79.056 154.762 290.336 40.995 63.249 94.461 199.636 406.529 33.75 37.45 41 446 45.762 73.105 113 263 259,057 573.77 46 018 51.16 84.701 136 300 337 982 815.084 57.275 98.347 164.494 412.583 1163.909 114.413 199.021 581.825 1668.771 Period 12% 13% 14% 15% 16% 17% 18% 19% 20% 25% 30% 2 2 .12 2.13 2.14 2.15 2.16 2.18 2.19 22 23 2.17 3.639 3 3.374 3.44 3.473 3.505 3.64 3.407 465 3.572 5.215 225 3.813 5.766 3.99 6.187 4 4.779 5.141 5.368 4.921 661 5.066 6877 6 6 742 9043 6 8 6353 .115 10.089 12.3 8.323 10.405 12.757 15:116 12.756 17.583 7 B 3.605 5.291 7297 9.683 12.523 15 902 19.923 8.536 10.73 13 233 16.085 19.337 23.045 8.754 11.067 13.727 16.786 20.304 24349 11.414 1424 17.519 - 7442207 11.259 12.916 15.073 16 490 19.142 20.799 25.802 70147 154 9.207 9.442 11.772 12.142 14.773 15.327 18.285 19.096 22.993 23.521 27.2 28.755 23.850 9 1 4.776 32.015 10 17.549 10.42 24.709 21.321 25.733 42.619 56.405 11 20.656 21.814 25.900 32.15 39 581 30.404 33.253 42.566 54208 68.76 25 65 32 924 74327 27 271 32.089 29 002 3 4.352 29.985 97.625 12 13 14 15 16 24 133 28.029 32.393 3720 12.753 34.383 40 417 34 931 42.219 50.818 60.965 37.581 43.842 30 85 35.785 43.672 51 GS 60.925 4 0.505 47.58 39.404 47.103 56.11 66.649 16.672 72.999 17 48.884 71,673 53.789 61.725 70 749 84.141 50.98 59.118 68.394 78 969 91.025 181.871 3 56.787 18 19 20 25 30 3719 45.244 54.841 66.261 79.85 95.022 115.265 139 166 1 65.418 402.042 966 712 56.717 66.075 75.836 98 212 102.444 212.793 434.745 55.75 6 3 44 72.052 133.334 2 41.333 48.497 59.196 72035 87.442 105.931 128. 117 154 74 186.688 471.981 1161.982 78.979 93.406 110 285 130.033 292.105 647.439 8 7.058 103.74 123 414 146.628 342.603 790.948 86.949 109.607 138.109 173.636 218.045 272 556 342.945 1054.791 3227.174 127.913 167 206 218.472 285.014 371.518 483 973 630.165 2 348.803 9729.965 99 603 115.38 249.214 530 312 80.947 155.62 2 93. 199 40 50 767 091 2400.018 1 013.704 3 459.507 1 342 025 4994.521 1779.09 7217.716 2360.757 10485.649 3 131.522 15089.502 4163 213 21813.094 5629.829 31515.335 7343.868 45497.191 30098 656 280256.698 120392 883 1699760.743 Exhibit 1 -A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods 3% Period 1 2 5% 1.05 6% 1.06 7% 1. 07 8% .00 9% 1.09 1.03 1 1 1 1% .01 .02 1.03 1041 1.103 1.124 11% .11 1.232 363 1.145 2% 1.02 101 1,061 1 082 1.104 1.188 4% 1.04 1.082 1.125 117 1.217 1.061 1.093 10% 1. 1 1 1.21 1.3311 1464 1.158 1.166 1.25 136 1295 1.225 1311 1.191 1 262 1.338 1 216 1412 1 126 1.159 1518 1.051 1.276 1.403 1.469 1.539 1.611 1 585 1.126 1.265 1 34 1419 1.501 1.587 1.772 1.87 1062 1072 1.149 1.316 1.407 1.606 1.714 1.949 2.076 1004 1.594 1.083 1.172 1.359 1.477 1.718 2.144 2.305 1.194 1.23 1.267 1.305 1.344 1.384 1.423 1.689 1.836 2356 2.550 1 094 1.105 1.116 1561 1.629 1.48 1.195 1.219 1 243 1 268 1.791 1698 1.567 2.105 1.677 1.828 1.998 2172 2.367 2.58 2813 3.056 3.342 3.642 1.851 1.9999 2.159 2.332 2518 2.72 2.937 2.839 3.152 1.539 1.71 1.127 426 1 601 1 796 2012 2 252 3499 131 .138 1.294 1.469 1.665 1.886 2.133 2.41 2 594 2853 3.138 3.452 3797 4.177 4.595 5.064 3.883 4.31 14 1.149 1.319 1.513 1.732 1 08 2261 15 1.161 1.558 2079 2.397 4.785 1.345 1.373 2.579 2.759 2.952 3.159 1.801 1.673 1948 1.173 1184 5.311 1.605 1663 1.702 2.183 2292 3.172 3.425 37 3.995 3.97 4328 5895 1.196 1.428 2.026 2.407 3.38 4.717 5.56 6.544 1.208 1.457 1.754 2. 107 2 527 3.617 4316 5.142 6 116 7 263 12 1.486 1 805 2.191 2.653 2.54 2693 2.854 3026 3.207 4.292 5743 10.286 18.42 3.87 4.661 5.604 6.727 8052 1.282 1.641 3.385 5.427 6.8438 .623 13.585 1348 2.094 2427 3.262 4.384 2.656 2 243 4.801 7.107 1911 2.208 692 40 50 1.489 1.645 10.835 17 449 45.259 117.391 7612 14.974 29.457 7.04 11.467 10063 21.725 45.902 18 268 31.409 7 4.358 65.001 184.565 50 2 Period T 13% 1.15 1277 1.443 12% 1.12 .251 1.405 1.574 15% 1.15 1.323 1.521 14% 1.14 13 1.482 1.62g 16% 1.16 1.316 17% 1.17 1.369 1.602 18% 1.18 1392 19% 119 1.416 20% 12 1.44 25% 1.25 1.563 2 30% 1.3 1.69 2.197 1 3 1.551 1.685 1.728 1.953 1.643 1939 1749 1.611 1874 2005 2074 2.441 2 856 5 1.762 1.925 2.488 2.1 2.436 3.052 3.815 6 1.974 2002 2.353 2.011 2.313 2.66 3.059 3.510 2.965 3.583 2826 2211 2.476 2.773 2.192 2.565 3.001 3.511 4.100 2.195 2.502 2.353 3252 4758 2.386 2.84 3.379 4.021 4705 2.288 27 3.185 3.759 4.435 5.234 3.713 4.627 6.275 8.157 10 604 3.278 4.3 5.96 2.658 3004 3.395 3 803 7.451 5.16 6.192 103 3.707 4046 4.411 4.807 5.695 9313 1 3.786 .105 3.479 3 AOS 3.836 4.226 4.652 5 117 6.176 6 777 7.43 11.642 5.624 658 17.922 23 298 12 4 325 4 818 535 6.936 7288 8064 9916 14562 4.363 4.898 5.492 6.153 6.886 7.699 8.599 9.596 10.699 30.288 4.867 7076 7.908 10.147 11.42 39.374 5.535 6 254 7.067 12.839 15.407 8.137 18.19 22.737 28.422 35.527 9 9.007 10.539 12.33 5.474 6.13 11.974 6.261 7.138 8.137 9276 13.59 .256 10.748 14.129 9.358 261 16.172 19 244 18.488 22 186 51.186 66.542 86 504 7 086 1 2 468 14.426 16 672 44409 9.024 10.575 16.879 25.623 7.69 8.613 12.375 14.232 14.463 16.777 10.197 16.367 19.461 25 30 40 50 9.646 17 2995 93.051 289.002 11.523 2 1.231 29.116 132.782 450.736 12.056 13.743 26.462 5095 188.884 700.233 32.919 66 212 267.864 1083.657 4 0.874 85 95 378.721 1670.704 19.748 23.106 50.658 111065 533.869 2566 215 19.673 23.214 27.393 6 2.669 143.871 750.373 3927.357 22.901 27252 32.429 7 7.888 184.675 1051.558 5 988.914 31.948 39.339 95.396 237 376 1469.772 9100.438 56.511 69.389 96.736 254.698 807 704 7523.164 70064.923 112.455 146.192 190.05 705.641 2619 996 36118.865 497929 223