Financial Planning

Suppose that you are age 32 today and plan on retiring at age 65. Your personal and family health history is such that you forecast that you will live to age 82. In retirement, you would like to have purchasing power of $60,000 (i.e., real dollars) before taxes. Suppose, for our example, that you anticipate receiving $20,000 in inflation-adjusted Social Security payments each year. Hence, your portfolio will need to provide $40,000 in real dollars each year. Assume that each payment is at the start of each year in retirement. How much will you need to have saved (in real dollars) by retirement? Assume that your portfolio earns a real annual rate of return of 5.24%, compounded annually.

Do not round at intermediate steps in your calculation. Round your answer to the nearest dollar. Do not type the $ symbol.