James Cardinal, 56, just retired after 31 years of teaching. He is a husband and father of three. Two of his children, Carl and Dan, still live at home while they are finishing college. James received a $150 000 lump sum retirement bonus and will receive $3800 per month from his retirement annuity. In addition, James has saved $150 000 in a retirement savings account and another $100 000 in a bank account. His retirement savings account earns an average return of 5 percent per year, compounded annually; while his bank account earns 2 percent per year, compounded annually. James has decided to deposit his retirement bonus in his bank account. James' current monthly expenses total $5800. James has asked for your advice in helping him determine how much he can withdraw per month from his other investments in order to supplement the income he receives from his retirement annuity. Specifically, will he be able to withdraw enough to cover off his $5800 of monthly expenses? If not, determine for how many years James will be able to withdraw income from his other investments. Assume that James will first withdraw income from his bank account. Once this account is empty he will withdraw income from his retirement savings account. Also, if James does have an income shortfall, determine what rate of return on his retirement savings account will allow him to cover his expenses during his retirement years after he has withdrawn all of his savings from his bank account. Assume that James will live for another 30 years, and that his current month-end expenses will remain at $5800 throughout his retire- ment. All figures are after-tax.

James Cardinal, 56, just retired after 31 years of teaching. He is a husband and father of three. Two of his children, Carl and Dan, still live at home while they are finishing college. James received a $150000 lump sum retirement bonus and will receive $3800 per month from his retirement annuity. In addition, James has saved $150000 in a retirement savings account and another $100000 in a bank account. His retirement savings account earns an average return of 5 percent per year, compounded annually; while his bank account earns 2 percent per year, compounded annually. James has decided to deposit his retirement bonus in his bank account. James' current monthly expenses total $5800. James has asked for your advice in helping him determine how much he can withdraw per month from his other investments in order to supplement the income he receives from his retirement annuity. Specifically, will he be able to withdraw enough to cover off his $5800 of monthly expenses? If not, determine for how many years James will be able to withdraw income from his other investments. Assume that James will first withdraw income from his bank account. Once this account is empty he will withdraw income from his retirement savings account. Also, if James does have an income shortfall, determine what rate of return on his retirement savings aecount will allow him to cover his expenses during his retirement years after he has withdrawn all of his savings from his bank account. Assume that James will live for another 30 years, and that his current month-end expenses will remain at $5800 throughout his retirement. All figures are after-tax