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 Family Children: Judy (age 9) and Elroy (age 5) Judy has a 529 Plan with a balance of $23,500 Elroy has a 529 Plan with a balance of $12,000 $150/month is being contributed to each childs 529 plan Expectations 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 Both Judy and Elroy will go to Galaxy University o Currently, one year of tuition is $13,200 and they expect to pay for 5 years of school per child o The Jetsons believe the cost of tuition will increase at a rate of 6% per year until the time both children graduate 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 Liabilities 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% BUSI 352 Page 2 of 2 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 Using the Capital Preservation Method, calculate how much capital the couple needs to retire at their goal ages using only retirement account assets. Using the Purchasing Power Preservation Method, calculate how much capital the couple needs to retire at their goal ages using only retirement account assets.