George (age 44) Earns $104,000 annually working at Spacely Sprockets Contributes $1,625 to his 401(k) each month Employer matches 100% of the first 3% and 50% of the next 2% of Georges salary Would like to retire at age 67 Social Security benefit estimate in todays dollars is $2,050/month at age 67

Jane (age 44) Earns $31,000 working part-time from home as a graphic artist Contributes $7,750 per year to a Simplified Employee Pension (SEP) plan Would like to retire at the same time as George Social Security benefit estimate in todays dollars in $1,725/month at age 67

George and Jane would like to have $125,000/year (in todays dollars) at retirement Neither George nor Jane expect their earnings to change before retirement

The Jetsons expect inflation to average 3% per year during their lifetime George and Jane each expect to live to age 95 They expect their invested money to average a 9% per year return during their lifetime

Additional Information about the Jetsons Current net worth is $1,072,000 Home mortgage: $325,000 (12 years left at $1,800/month) Auto loan: $17,000 (2 years left at $730/month) Credit Card: $8,400 (paying $450/month) Cumulative living expenses (food, utilities, fuel, clothing, etc.): $1,700/month Effective income tax rate is 18%

Assets Home value is $575,000 Georges 401(k) balance is $625,000 Janes SEP balance is $95,000 Investment account balance is $45,000 Bank CD balance is $75,000 (at 1.5% interest) Checking account balance is $7,400

A) In your own words, explain the advantages and disadvantages of each of the three methods of retirement needs analysis and why the calculated amounts are different.

B) If the couple is not on track to meet their financial goals (individual or collective), what are three alternative ideas to help them meet their goals? Using calculations, show and explain each alternative to the couple.

C) Calculate the following ratios for the Jetsons and comment on what each one represents and how each relates to their financial goals:

• Emergency Fund Ratio
• Debt to Total Assets
• Net Worth to Total Assets
• Savings Rate (combined)