Jamie Lee and Ross, now 57 and still very active, have plenty of time on their hands now that the triplets are away at college. They both realized that time has just flown by; over twenty-four years have passed since they married!
Looking back over the past years, they realized that they have worked hard in their careers, Jamie Lee as the proprietor of a cupcake caf and Ross, self-employed as a web-page designer. They have enjoyed raising their family and strived to be financially sound as they are looking to retirement that is just around the corner. They saved regularly and invested wisely over the years. They rebounded nicely from the economic crisis over the past few years, as they watched their investments closely and adjusted their strategies when they felt it necessary. They purchase vehicles with cash and do not carry credit card balances, choosing instead to use them for convenience only. The triplets are pursuing their masters degrees and have tuition covered through work/study programs at the university.
Jamie Lee and Ross are just a few short years from realizing their goals of retiring at 65 and purchasing a home at the beach!
They are reviewing their financial situation to ensure they will be ready for retirement. They anticipate being able to live comfortably with 80% of their current expenses. The rate of return on their investments until they retire is 3%. They expect this percentage to drop to 2% after retirement. Use this information, along with Exhibit 1-A, Exhibit 1-B, and the information provided below to determine the annual deposit amount Jamie Lee and Ross will need to make until they retire in order to make up the shortfall between their estimated expenses and income needed during retirement. Each answer must have a value for the assignment to be complete. Enter "0" for any unused categories.
Current Expense Amounts (Jamie Lee and Ross Combined)
Fixed expenses: $4,000/month
Variable expenses: $3,000/month
Estimated Income Amounts (Jamie Lee and Ross Combined)
Social Security: $2,050/month
Current IRA balance: $99,000
Estimated IRA withdrawal: $500/month
Other investments: $31,400/year
$ 8 A 3 (A) A) Estimated Annual Retirement Living Expenses Estimated annual living expenses if retiring today Number of years until retirement Expected annual rate of return before retirement Future value (use Exhibit 1-A) Projected annual retirement living expenses, adjusted for inflation Estimated Annual Income at Retirement Social Security income Company pension, personal retirement account income Investment and other income Total retirement income Annual shortfall of income after retirement (A - B) Expected years in retirement Expected annual rate of return before retirement Expected annual rate of return on invested funds after retirement Future value factor for a series of deposits (use Exhibit 1-B) Annual deposit required to accumulate the amount needed (B) (C) $ 30 S 3 2 (D) Exhibit 1 -A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods Period 9% 10% 11% 2% 102 104 3% 103 1 5% 105 1.105 109 4% 104 1062 1.125 1.11 106 1124 2 11 121 1.331 1212 3 1061 1.150 1191 1.17 1% 101 102 105 1041 1051 1.062 1072 1053 1094 1001 1.095 1.126 1.150 1.194 123 7% 107 1145 1225 1311 1405 1501 1606 1718 1838 8% 108 1166 126 1:36 1660 1587 1714 1851 1999 5 1082 1.104 1.126 1149 1172 1.195 1219 1243 6 7 1.366 1518 1685 187 2076 2305 2558 1217 1 265 1316 1300 1423 1.48 8 1 267 9 1.305 1344 10 1.105 1216 1276 1.34 1 407 1477 1551 1629 171 1.796 1886 1.96 2079 2.185 2 200 11 1116 1354 2105 2252 1.186 1295 1 412 1530 1677 1828 1993 2172 2367 2.50 2813 3066 3.342 3642 397 4320 4717 5.142 5604 1 262 1338 1419 1504 1504 1689 1791 1000 2012 2.133 2261 2.397 254 2693 2854 3.026 3207 1611 1.772 1949 2144 2358 2594 2050 3138 3452 3707 4.177 4.595 5054 556 2159 2332 2518 272 2937 12 2830 3.152 3.490 1 127 13 1469 241 14 1.138 1.109 1.161 1294 1319 1346 1513 2570 2759 15 1558 3.172 431 4.785 5.311 5895 16 1.173 1605 2952 3.150 17 1373 14 1428 1184 1601 1665 1732 1801 1873 1916 2020 2.107 2.191 2666 3243 4801 18 1.190 3.58 1702 1754 37 3.996 4316 6544 7265 19 1208 1457 3617 2 407 2 527 2655 3396 20 122 1636 3.87 6.116 6.727 10835 8062 25 1 282 1641 2004 5.427 6848 30 1388 1811 2427 5743 7612 17 449 10.063 21725 13585 22890 65001 184565 40 2200 704 10 286 31100 1489 1645 14974 29 457 50 2682 4384 7.107 11 467 18 42 46.902 74358 117391 Period 14% 16% 17% 12% 112 13% 1.13 1277 1 2 1.16 15% 1.15 1 323 1.10 13 18% 1.16 1.392 1.17 1.369 1.602 19% 1.19 1 416 1.685 20% 1.2 1.41 1.726 2074 25% 1.25 1.563 1 346 30% 1.3 1.60 3 1.521 1643 1.953 2.197 1482 1689 1574 1.63 1.561 1.811 2.1 1,874 1999 2005 1.749 2011 2.856 2.441 3.052 5 172 1842 1.925 2.192 2280 2386 2488 3.713 6 1974 2.195 2.436 27 284 3.815 4.627 2082 2.359 2.313 2.66 2.565 9.000 2.966 3.583 7 2211 2.826 3.185 3.379 4.768 6.275 8 2.478 2658 2.502 2853 3.252 3.050 3.278 3.511 3.759 4021 4.3 5.96 8.157 9 2.773 3.518 3.809 4.100 4785 5.16 7.451 10.604 3.004 3.395 10 3.100 3.707 4.046 4.411 4,807 5.234 5.695 6.192 9.319 19.786 11 3.479 3836 4.652 5.117 5.624 6.178 743 11.642 4226 4.818 6.777 8064 17922 23.200 12 3.89 5.936 7250 8.916 14.552 4335 4898 5.35 6.153 19 4.363 5.492 6.886 7.699 8.599 9.596 10.699 18.19 30.288 14 4887 6261 7,076 7.968 9.007 10.147 11.42 12839 22 737 39.374 5535 6254 15 5.474 8.137 9.266 10.539 13.50 15.407 28.422 7.138 8.137 51.156 66.542 16 6.13 9.358 10.748 12.33 16.172 18.488 35.527 17 6.866 7986 12.468 409 86.500 9276 10.575 10761 12.375 14 426 16,870 18 76 8.613 19 19244 22.01 27 252 32 429 9024 10.197 11 523 21231 39116 14.463 16.777 19.461 112.455 146.192 16.672 19673 23214 27.390 62.600 12.056 13743 25.462 50.95 14232 16.367 32.010 20 22.186 25623 31.948 38338 95 396 19.748 23.106 50 650 56.511 69.389 86.736 264.690 807,794 190.05 705.641 25 17 40 874 77380 184675 30 29.90 66.212 85.85 111.065 149.371 237.976 2619.996 40 93050 132.782 188.884 267 364 378.721 750 378 7523 164 36118 065 539.869 2566 215 1051668 5968914 1669.772 9100438 50 280.002 450736 700 233 1083 657 1670.700 3927 357 70064.923 497929.223 Exhibit 1-B Future Value (Compounded Sum) of $1 Paid In at the End of Each Period for a Given Number of Time Periods (an Annuity) Period 5% 7% 11% 3% + 6% 1 + 1 1% 1 201 303 406 2 9% 1 200 4% 1 204 3 122 4246 203 3001 207 2% + 20 306 4.122 6.204 6308 7.434 8% 1 208 3245 4.506 2.05 3150 4.31 3 206 3164 4375 10% 1 2.1 3:31 4641 3216 4.44 3278 4.575 2.11 3342 4.71 + 4.154 5 6300 6.965 6228 6 5.101 6162 7 214 7915 7 5.416 6638 7.898 9214 10583 7562 8.000 6637 6975 8.294 9.DOT 11401 5751 7.163 8.654 10 26 11 976 6800 8142 9.540 11.027 12 678 92 5867 7.336 8.9.23 10637 12488 6.105 7.716 9.487 11 436 13.679 . 11020 9.750 11.050 14.164 9 9.369 9.755 10 150 13021 10 10.452 10.95 11 464 12006 13. 131 13 816 14 487 15 195 15 937 16 722 11 12808 13486 14207 15.754 16 645 18.631 19 661 12.169 13.412 12 12.553 16 917 17 888 18 977 20141 21 384 22713 14.192 15618 15 025 16627 14.972 16:37 18.882 21.015 13 1466 17 713 21 495 20141 22.55 22.950 26.019 25 212 30095 14.947 17.036 18 292 24 215 15 974 17 205 19.500 21 670 24623 27975 31 772 35.95 15 16007 18.500 20024 23 275 25 120 27 162 20561 34.400 39 19 16 17 256 18639 21826 25673 33 003 20.157 21.79 23 657 25 84 27 888 30 84 17 18.45 20012 23 600 28 213 33.75 36 974 40 545 44 601 50396 18 19 616 23 414 25 645 30 906 33.990 37 45 41 501 45.000 19 20 311 25. 117 37 379 41.446 46.018 20 40 995 51.16 22019 28 243 21 412 22 841 24 297 3205 40 560 50.400 51.169 57 275 98 347 56.939 64203 114 415 84.701 27671 29775 41646 06.085 95.025 152667 36.450 47575 75 401 112797 30 33.76 6736 54.365 79.000 1542 290 335 34785 33065 47.721 56450 1205 209 348 63 249 94.461 190 636 45 762 73.106 113 265 200067 673 77 136 308 337882 199021 681626 10 154494 442093 1163.909 48 886 50 64 453 84.679 406 620 815084 1658 771 Period 13% 15% 16% 18% 19% 20% 25% 12% 1 17% 1 + 1 1 1 1 1 1 1 30% 1 23 2 212 214 216 225 3 1 215 3407 4.85 6.45 8 3.374 4.779 3813 2.15 3473 4995 6742 3506 5066 22 354 5.368 2.10 3.672 6216 7154 4 4.921 5.756 6 187 5 661 217 3.500 6141 7014 9.207 11.772 14.773 8.207 0045 210 3606 6291 7207 9.685 12 623 15 900 19 923 6 8.115 8.536 8.754 6677 8.977 11.414 14 24 9.442 7 10 000 10.73 8.325 10.405 12.767 15 416 18.42 12 142 15327 8 12.756 1765 23 856 123 13.235 16085 9.93 12016 16 490 20790 25.900 11067 13.727 15.786 20 304 24 349 14776 17.619 21 321 18.286 22305 11.259 15 073 19 842 25 802 33 253 12 556 54200 68 76 32015 42 610 10 19 005 23 621 25755 17 540 19337 24 700 11 20 656 21 814 23 045 272 30 404 32.15 30501 12 24133 37 10 27 271 32080 13 45 244 14 64 541 15 3726 42.753 29.985 3400 40 417 46 672 63730 61.725 29002 34562 40 505 47.58 56.717 65070 75.836 37581 43.42 5098 60116 68 394 25730 30.00 36 756 43 672 0166 60 925 71673 84.141 90 600 39 404 47100 5611 66640 78979 93406 34931 42.219 50 818 60.965 72939 67 068 10374 48. 497 50 195 72056 87 442 105 991 15 79.85 06949 100 687 138.100 173 636 218.045 273 566 56.400 74127 97625 127915 167 206 218.472 206014 371.618 483 973 630 165 2348 800 8720 065 17 18 55.75 115.266 128 117 15474 63 44 70 749 78.960 38 212 123 414 138 166 165.418 20 72052 80 04 91000 102.444 110 286 130 033 292105 11530 146 628 186 688 342 045 133 334 181671 212793 342603 471981 1064791 8 8 8 8 8 8 402042 966712 241 333 396 434 745 249 214 630 312 2350 757 647 450 1181 182 88 15562 293190 1013.704 3450 507 790 940 4163 213 3227 174 30068 656 767091 1342025 1779.09 3134522 7343 858 120092 883 2400 010 4994521 7217.716 10435 640 15000 502 21613 004 31515336 45497 101 200266 503 1650750 743 $ 8 A 3 (A) A) Estimated Annual Retirement Living Expenses Estimated annual living expenses if retiring today Number of years until retirement Expected annual rate of return before retirement Future value (use Exhibit 1-A) Projected annual retirement living expenses, adjusted for inflation Estimated Annual Income at Retirement Social Security income Company pension, personal retirement account income Investment and other income Total retirement income Annual shortfall of income after retirement (A - B) Expected years in retirement Expected annual rate of return before retirement Expected annual rate of return on invested funds after retirement Future value factor for a series of deposits (use Exhibit 1-B) Annual deposit required to accumulate the amount needed (B) (C) $ 30 S 3 2 (D) Exhibit 1 -A Future Value (Compounded Sum) of $1 after a Given Number of Time Periods Period 9% 10% 11% 2% 102 104 3% 103 1 5% 105 1.105 109 4% 104 1062 1.125 1.11 106 1124 2 11 121 1.331 1212 3 1061 1.150 1191 1.17 1% 101 102 105 1041 1051 1.062 1072 1053 1094 1001 1.095 1.126 1.150 1.194 123 7% 107 1145 1225 1311 1405 1501 1606 1718 1838 8% 108 1166 126 1:36 1660 1587 1714 1851 1999 5 1082 1.104 1.126 1149 1172 1.195 1219 1243 6 7 1.366 1518 1685 187 2076 2305 2558 1217 1 265 1316 1300 1423 1.48 8 1 267 9 1.305 1344 10 1.105 1216 1276 1.34 1 407 1477 1551 1629 171 1.796 1886 1.96 2079 2.185 2 200 11 1116 1354 2105 2252 1.186 1295 1 412 1530 1677 1828 1993 2172 2367 2.50 2813 3066 3.342 3642 397 4320 4717 5.142 5604 1 262 1338 1419 1504 1504 1689 1791 1000 2012 2.133 2261 2.397 254 2693 2854 3.026 3207 1611 1.772 1949 2144 2358 2594 2050 3138 3452 3707 4.177 4.595 5054 556 2159 2332 2518 272 2937 12 2830 3.152 3.490 1 127 13 1469 241 14 1.138 1.109 1.161 1294 1319 1346 1513 2570 2759 15 1558 3.172 431 4.785 5.311 5895 16 1.173 1605 2952 3.150 17 1373 14 1428 1184 1601 1665 1732 1801 1873 1916 2020 2.107 2.191 2666 3243 4801 18 1.190 3.58 1702 1754 37 3.996 4316 6544 7265 19 1208 1457 3617 2 407 2 527 2655 3396 20 122 1636 3.87 6.116 6.727 10835 8062 25 1 282 1641 2004 5.427 6848 30 1388 1811 2427 5743 7612 17 449 10.063 21725 13585 22890 65001 184565 40 2200 704 10 286 31100 1489 1645 14974 29 457 50 2682 4384 7.107 11 467 18 42 46.902 74358 117391 Period 14% 16% 17% 12% 112 13% 1.13 1277 1 2 1.16 15% 1.15 1 323 1.10 13 18% 1.16 1.392 1.17 1.369 1.602 19% 1.19 1 416 1.685 20% 1.2 1.41 1.726 2074 25% 1.25 1.563 1 346 30% 1.3 1.60 3 1.521 1643 1.953 2.197 1482 1689 1574 1.63 1.561 1.811 2.1 1,874 1999 2005 1.749 2011 2.856 2.441 3.052 5 172 1842 1.925 2.192 2280 2386 2488 3.713 6 1974 2.195 2.436 27 284 3.815 4.627 2082 2.359 2.313 2.66 2.565 9.000 2.966 3.583 7 2211 2.826 3.185 3.379 4.768 6.275 8 2.478 2658 2.502 2853 3.252 3.050 3.278 3.511 3.759 4021 4.3 5.96 8.157 9 2.773 3.518 3.809 4.100 4785 5.16 7.451 10.604 3.004 3.395 10 3.100 3.707 4.046 4.411 4,807 5.234 5.695 6.192 9.319 19.786 11 3.479 3836 4.652 5.117 5.624 6.178 743 11.642 4226 4.818 6.777 8064 17922 23.200 12 3.89 5.936 7250 8.916 14.552 4335 4898 5.35 6.153 19 4.363 5.492 6.886 7.699 8.599 9.596 10.699 18.19 30.288 14 4887 6261 7,076 7.968 9.007 10.147 11.42 12839 22 737 39.374 5535 6254 15 5.474 8.137 9.266 10.539 13.50 15.407 28.422 7.138 8.137 51.156 66.542 16 6.13 9.358 10.748 12.33 16.172 18.488 35.527 17 6.866 7986 12.468 409 86.500 9276 10.575 10761 12.375 14 426 16,870 18 76 8.613 19 19244 22.01 27 252 32 429 9024 10.197 11 523 21231 39116 14.463 16.777 19.461 112.455 146.192 16.672 19673 23214 27.390 62.600 12.056 13743 25.462 50.95 14232 16.367 32.010 20 22.186 25623 31.948 38338 95 396 19.748 23.106 50 650 56.511 69.389 86.736 264.690 807,794 190.05 705.641 25 17 40 874 77380 184675 30 29.90 66.212 85.85 111.065 149.371 237.976 2619.996 40 93050 132.782 188.884 267 364 378.721 750 378 7523 164 36118 065 539.869 2566 215 1051668 5968914 1669.772 9100438 50 280.002 450736 700 233 1083 657 1670.700 3927 357 70064.923 497929.223 Exhibit 1-B Future Value (Compounded Sum) of $1 Paid In at the End of Each Period for a Given Number of Time Periods (an Annuity) Period 5% 7% 11% 3% + 6% 1 + 1 1% 1 201 303 406 2 9% 1 200 4% 1 204 3 122 4246 203 3001 207 2% + 20 306 4.122 6.204 6308 7.434 8% 1 208 3245 4.506 2.05 3150 4.31 3 206 3164 4375 10% 1 2.1 3:31 4641 3216 4.44 3278 4.575 2.11 3342 4.71 + 4.154 5 6300 6.965 6228 6 5.101 6162 7 214 7915 7 5.416 6638 7.898 9214 10583 7562 8.000 6637 6975 8.294 9.DOT 11401 5751 7.163 8.654 10 26 11 976 6800 8142 9.540 11.027 12 678 92 5867 7.336 8.9.23 10637 12488 6.105 7.716 9.487 11 436 13.679 . 11020 9.750 11.050 14.164 9 9.369 9.755 10 150 13021 10 10.452 10.95 11 464 12006 13. 131 13 816 14 487 15 195 15 937 16 722 11 12808 13486 14207 15.754 16 645 18.631 19 661 12.169 13.412 12 12.553 16 917 17 888 18 977 20141 21 384 22713 14.192 15618 15 025 16627 14.972 16:37 18.882 21.015 13 1466 17 713 21 495 20141 22.55 22.950 26.019 25 212 30095 14.947 17.036 18 292 24 215 15 974 17 205 19.500 21 670 24623 27975 31 772 35.95 15 16007 18.500 20024 23 275 25 120 27 162 20561 34.400 39 19 16 17 256 18639 21826 25673 33 003 20.157 21.79 23 657 25 84 27 888 30 84 17 18.45 20012 23 600 28 213 33.75 36 974 40 545 44 601 50396 18 19 616 23 414 25 645 30 906 33.990 37 45 41 501 45.000 19 20 311 25. 117 37 379 41.446 46.018 20 40 995 51.16 22019 28 243 21 412 22 841 24 297 3205 40 560 50.400 51.169 57 275 98 347 56.939 64203 114 415 84.701 27671 29775 41646 06.085 95.025 152667 36.450 47575 75 401 112797 30 33.76 6736 54.365 79.000 1542 290 335 34785 33065 47.721 56450 1205 209 348 63 249 94.461 190 636 45 762 73.106 113 265 200067 673 77 136 308 337882 199021 681626 10 154494 442093 1163.909 48 886 50 64 453 84.679 406 620 815084 1658 771 Period 13% 15% 16% 18% 19% 20% 25% 12% 1 17% 1 + 1 1 1 1 1 1 1 30% 1 23 2 212 214 216 225 3 1 215 3407 4.85 6.45 8 3.374 4.779 3813 2.15 3473 4995 6742 3506 5066 22 354 5.368 2.10 3.672 6216 7154 4 4.921 5.756 6 187 5 661 217 3.500 6141 7014 9.207 11.772 14.773 8.207 0045 210 3606 6291 7207 9.685 12 623 15 900 19 923 6 8.115 8.536 8.754 6677 8.977 11.414 14 24 9.442 7 10 000 10.73 8.325 10.405 12.767 15 416 18.42 12 142 15327 8 12.756 1765 23 856 123 13.235 16085 9.93 12016 16 490 20790 25.900 11067 13.727 15.786 20 304 24 349 14776 17.619 21 321 18.286 22305 11.259 15 073 19 842 25 802 33 253 12 556 54200 68 76 32015 42 610 10 19 005 23 621 25755 17 540 19337 24 700 11 20 656 21 814 23 045 272 30 404 32.15 30501 12 24133 37 10 27 271 32080 13 45 244 14 64 541 15 3726 42.753 29.985 3400 40 417 46 672 63730 61.725 29002 34562 40 505 47.58 56.717 65070 75.836 37581 43.42 5098 60116 68 394 25730 30.00 36 756 43 672 0166 60 925 71673 84.141 90 600 39 404 47100 5611 66640 78979 93406 34931 42.219 50 818 60.965 72939 67 068 10374 48. 497 50 195 72056 87 442 105 991 15 79.85 06949 100 687 138.100 173 636 218.045 273 566 56.400 74127 97625 127915 167 206 218.472 206014 371.618 483 973 630 165 2348 800 8720 065 17 18 55.75 115.266 128 117 15474 63 44 70 749 78.960 38 212 123 414 138 166 165.418 20 72052 80 04 91000 102.444 110 286 130 033 292105 11530 146 628 186 688 342 045 133 334 181671 212793 342603 471981 1064791 8 8 8 8 8 8 402042 966712 241 333 396 434 745 249 214 630 312 2350 757 647 450 1181 182 88 15562 293190 1013.704 3450 507 790 940 4163 213 3227 174 30068 656 767091 1342025 1779.09 3134522 7343 858 120092 883 2400 010 4994521 7217.716 10435 640 15000 502 21613 004 31515336 45497 101 200266 503 1650750 743
