Eunhwa, age 45, currently earns $70,000. Her wage replacement ratio is 70%. She expects that inflation will average 3 percent for her entire life expectancy. She expects to earn 9% on her investments and retire at age 65, possibly living to age 90. Her social security retirement benefit in todays dollars is $15,000 per year.

Use the Annuity Method

Calculate Eunhwas capital needed at retirement at age 65 and answer the amount Eunhwa must save at the beginning of each year, assuming she has no current savings accumulated for retirement.

Use the short cut of subtracting inflation to get the real rate of return.

$11,790.10

$12,851.21

$14,921.62

$22,620.20