Grady Zebrowski, age 25, just graduated from college, accepted his first job with a $51,000 salary, and is already looking forward to retirement in 40 years. He assumes a 2.1 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 10 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 B 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? 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? Click on the table icon to view the FVIF table B. Click on the table icon to view the PVIFA table B. Click on the table icon to view the FVIFA table B TABLE 16.2 The Average Tax Rate Average Tax Rate Retirement Income Couples Filing 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 Note: To estimate your anticipated average tax rate at retirement, you can use the table above based on current tax rates. If you anticipate a change in future tax ratesfor example, a flat taxuse that number Compound Sum of $1 (FVIF) n = 20 n = 40 2.00% 1.4859 2.2080 2.10% 1.5154 2.2963 2.20% 1.5453 2.3880 2.30% 1.5758 2.4833 2.40% 1.6069 2.5822 2.50% 1.6386 2.6851 2.60% 1.6709 2.7919 2.70% 1.7038 2.9028 2.80% 1.7372 3.0180 2.90% 1.7714 3.1377 3.00% 1.8061 3.2620 3.10% 1.8415 3.3911 3.20% 1.8776 3.5252 3.30% 1.9143 3.6645 3.40% 1.9517 3.8091 3.50% 1.9898 3.9593 3.60% 2.0286 4.1152 3.70% 2.0681 4.2771 3.80% 2.1084 4.4452 3.90% 2.1494 4.6198 4.00% 2.1911 4.8010 4.10% 2.23364.9892 4.20% 2.2770 5.1845 Annuity (PVIFA) n20 n = 40 1.00%18.045632.8347 1.10% 17.8651 32.2195 1.20% 17.6873 31.6205 1.30% 17.5120 31.0372 1.40% 17.3391 30.4692 1.50% 17.1686 29.9158|| 1.60% 17.0006 29.3768 1.70% 16.834928.8517 1.80% 16.6715 28.3401 1.90% 16.5103 27.8414 2.00% 16.3514 27.3555 2.10% 16.194726.8818 2.20% 16.0402 26.4200 2.30% 15.887825.9698 2.40% 15.737425.5309 2.50% 15.5892 25.1028 2.60% 15.442924.6853 2.70% 15.298624.2780 2.80% 15.1563 23.8807 2.90% 15.016023.4930 3.00% 14.877523. 1148 3.10% 14.740922.7456 3.20% 14.6061 22.3853 3.30% 14.4731 22.0336 3.40% 14.3419 21.6903 3.50% 14.2124 21.3551 3.60% 14.0847 21.0277 3.70% 13.9586 20.7080 3.80% 13.8342 20.3958 3.90% 13.7115 20.0908 14.00%|13.590319.7928| 14.10% 13.470819.5016 4.20% 13.352819.2171 4.30% 13.2363 18.9390 4.40% 13.121418.6673 4.50%13.007918.4016 4.60% 12.896018. 1418 4.70% 12.785417.8879 4.80% 12.676317.6395 4.90% 12.568617.3967 5.00% 12.462217.1591 Monthly Installment Loan Tables ($1,000 loan ith interest payments compounded monthly) n = 240 n = 480 6 462.0409 1991.4907 7 520.9267 2624.8134 8 589.0204 3491.0078 9 667.8869 4681.3203 10 759.3688 6324.0796 11 865.6380 8600.1272 12 989.2554 11764.7725 Grady Zebrowski, age 25, just graduated from college, accepted his first job with a $51,000 salary, and is already looking forward to retirement in 40 years. He assumes a 2.1 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 10 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 B 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? 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? Click on the table icon to view the FVIF table B. Click on the table icon to view the PVIFA table B. Click on the table icon to view the FVIFA table B TABLE 16.2 The Average Tax Rate Average Tax Rate Retirement Income Couples Filing 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 Note: To estimate your anticipated average tax rate at retirement, you can use the table above based on current tax rates. If you anticipate a change in future tax ratesfor example, a flat taxuse that number Compound Sum of $1 (FVIF) n = 20 n = 40 2.00% 1.4859 2.2080 2.10% 1.5154 2.2963 2.20% 1.5453 2.3880 2.30% 1.5758 2.4833 2.40% 1.6069 2.5822 2.50% 1.6386 2.6851 2.60% 1.6709 2.7919 2.70% 1.7038 2.9028 2.80% 1.7372 3.0180 2.90% 1.7714 3.1377 3.00% 1.8061 3.2620 3.10% 1.8415 3.3911 3.20% 1.8776 3.5252 3.30% 1.9143 3.6645 3.40% 1.9517 3.8091 3.50% 1.9898 3.9593 3.60% 2.0286 4.1152 3.70% 2.0681 4.2771 3.80% 2.1084 4.4452 3.90% 2.1494 4.6198 4.00% 2.1911 4.8010 4.10% 2.23364.9892 4.20% 2.2770 5.1845 Annuity (PVIFA) n20 n = 40 1.00%18.045632.8347 1.10% 17.8651 32.2195 1.20% 17.6873 31.6205 1.30% 17.5120 31.0372 1.40% 17.3391 30.4692 1.50% 17.1686 29.9158|| 1.60% 17.0006 29.3768 1.70% 16.834928.8517 1.80% 16.6715 28.3401 1.90% 16.5103 27.8414 2.00% 16.3514 27.3555 2.10% 16.194726.8818 2.20% 16.0402 26.4200 2.30% 15.887825.9698 2.40% 15.737425.5309 2.50% 15.5892 25.1028 2.60% 15.442924.6853 2.70% 15.298624.2780 2.80% 15.1563 23.8807 2.90% 15.016023.4930 3.00% 14.877523. 1148 3.10% 14.740922.7456 3.20% 14.6061 22.3853 3.30% 14.4731 22.0336 3.40% 14.3419 21.6903 3.50% 14.2124 21.3551 3.60% 14.0847 21.0277 3.70% 13.9586 20.7080 3.80% 13.8342 20.3958 3.90% 13.7115 20.0908 14.00%|13.590319.7928| 14.10% 13.470819.5016 4.20% 13.352819.2171 4.30% 13.2363 18.9390 4.40% 13.121418.6673 4.50%13.007918.4016 4.60% 12.896018. 1418 4.70% 12.785417.8879 4.80% 12.676317.6395 4.90% 12.568617.3967 5.00% 12.462217.1591 Monthly Installment Loan Tables ($1,000 loan ith interest payments compounded monthly) n = 240 n = 480 6 462.0409 1991.4907 7 520.9267 2624.8134 8 589.0204 3491.0078 9 667.8869 4681.3203 10 759.3688 6324.0796 11 865.6380 8600.1272 12 989.2554 11764.7725