Grady Zebrowski, age 25, just graduated from college, accepted his first job with a $47,000 salary, and is already looking forward to retirement in 40 years. He assumes a 2.9 percent inflation rate and plans to live in retirement for 20 years. He does not want to plan on any Social Security benefits. Assume Grady can earn a 6 percent rate of return on his investments prior to retirement and a 7 percent rate of return on his investments post-retirement to answer the following questions using your financial calculator.

a. Grady wants to replace 90 percent of his current net income. What is his annual need in today's

dollars?

b. Using the table Grady thinks he might have an average tax rate of 13 percent at retirement if he is married. Adjusting for taxes, how much does Grady really need per year, in today's dollars?

c. Adjusting for inflation, how much does Grady need per year in future dollars when he begins retirement in 40 years?

d. If he needs this amount for 20 years, how much does he need in total for retirement? (Hint: Use the inflation-adjusted rate of return.)

e. How much does Grady need to save per month to reach his retirement goal assuming he does not receive any employer match on his retirement savings?

Table 16.2 The Average Tax Rate
		Average Tax Rate
Retirement Income		Couples Filling Jointly	Individuals
20,000		7%	10%
30,000		10	14
40,000		12	17
50,000		14	20
60,000		17	22
70,000		19	23
80,000		21	24
90,000		22	25
100,000		23	26
150,000		28	30

		Compound Sum of $1 (FVIF)
n	5%	6%	7%	8%	9%	10%		11%		12%
24	3.2251	4.0489	5.0724	6.3412	7.9111	9.8497		12.2392		15.1786
25	3.3864	4.2919	5.4274	6.8485	8.6231	10.8347		13.5855		17.0001
26	3.5557	4.5494	5.8074	7.3964	9.3992	11.9182		15.0799		19.0401
27	3.7335	4.8223	6.2139	7.9881	10.2451	13.1100		16.7386		21.3249
28	3.9201	5.1117	6.6488	8.6271	11.1671	14.4210		18.5799		23.8839
29	4.1161	5.4184	7.1143	9.3173	12.1722	15.8631		20.6237		26.7499
30	4.3219	5.7435	7.6123	10.0627	13.2677	17.4494		22.8923		29.9599
31	4.5380	6.0881	8.1451	10.8677	14.4618	19.1943		25.4104		33.5551
32	4.7649	6.4534	8.7153	11.7371	15.7633	21.1138		28.2056		37.5817
33	5.0032	6.8406	9.3253	12.676	17.182	23.2252		31.3082		42.0915
34	5.2533	7.2510	9.9781	13.6901	18.7284	25.5477		34.7521		47.1425
35	5.5160	7.6861	10.6766	14.7853	20.4140	28.1024		38.5749		52.7996

		Present Value of an Annuity (PVIFA)
n	1%	2%	3%	4%	5%	6%	7%	8%	9%	10%
15	13.8651	12.8493	11.9379	11.1184	10.3797	9.7122	9.1079	8.5595	8.0607	7.6061
16	14.7179	13.5777	12.5611	11.6523	10.8378	10.1059	9.4466	8.8514	8.3126	7.8237
17	15.5623	14.2919	13.1661	12.1657	11.2741	10.4773	9.7632	9.1216	8.5436	8.0216
18	16.3983	14.9920	13.7535	12.6593	11.6896	10.8276	10.0591	9.3719	8.7556	8.2014
19	17.2260	15.6785	14.3238	13.1339	12.0853	11.1581	10.3356	9.6036	8.9501	8.3649
20	18.0456	16.3514	14.8775	13.5903	12.4622	11.4699	10.5940	9.8181	9.1285	8.5136
21	18.8570	17.0112	15.4150	14.0292	12.8212	11.7641	10.8355	10.0168	9.2922	8.6487
22	19.6604	17.6580	15.9369	14.4511	13.1630	12.0416	11.0612	10.2007	9.4424	8.7715
23	20.4558	18.2922	16.4436	14.8568	13.4886	12.3034	11.2722	10.3711	9.5802	8.8832
24	21.2434	18.9139	16.9355	15.2470	13.7986	12.5504	11.4693	10.5288	9.7066	8.9847
25	22.0232	19.5235	17.4131	15.6221	14.0939	12.7834	11.6536	10.6748	9.8226	9.0770
26	22.7952	20.1210	17.8768	15.9828	14.3752	13.0032	11.8258	10.8100	9.9290	9.1609
27	23.5596	20.7069	18.3270	16.3296	14.6430	13.2105	11.9867	10.9352	10.0266	9.2372
28	24.3164	21.2813	18.7641	16.6631	14.8981	13.4062	12.1371	11.0511	10.1161	9.3066
29	25.0658	21.8444	19.1885	16.9837	15.1411	13.5907	12.2777	11.1584	10.1983	9.3696
30	25.8077	22.3965	19.6004	17.2920	15.3725	13.7648	12.4090	11.2578	10.2737	9.4269

Future Value of an Annuity (FVIFA)
n	6%	7%	8%	9%	10%	11%	12%	13%
24	50.8156	58.1767	66.7648	76.7898	88.4973	102.174	118.1552	136.8315
25	54.8645	63.2490	73.1059	84.7009	98.3471	114.413	133.3339	155.6196
26	59.1564	68.6765	79.9544	93.3240	109.1818	127.999	150.3339	176.8501
27	63.7058	74.4838	87.3508	102.7231	121.0999	143.079	169.3740	200.8406
28	68.5281	80.6977	95.3388	112.9682	134.2099	159.817	190.6989	227.9499
29	73.6398	87.3465	103.9659	124.1354	148.6309	178.397	214.5828	258.5834
30	79.0582	94.4608	113.2832	136.3075	164.4940	199.021	241.3327	293.1992
31	84.8017	102.0730	123.3459	149.5752	181.9434	221.913	271.2926	332.3151
32	90.8898	110.2182	134.2135	164.0370	201.1378	247.324	304.8477	376.5161
33	97.3432	118.9334	145.9506	179.8003	222.2515	275.529	342.4294	426.4632
34	104.1838	128.2588	158.6267	196.9823	245.4767	306.837	384.5210	482.9034
35	111.4348	138.2369	172.3168	215.7108	271.0244	341.59	431.6635	546.6808