Jaylen and Avery would like to retire at age 67. They expect their living expenses in their first year of retirement to be equivalent to 75% of their current earned income (as adjusted for inflation). They assume their life expectancy in retirement will be 30 years. They intend to claim Social Security benefits at age 67. They consulted the Social Security Administration website and determined their monthly retirement benefits at FRA would be $2,500 (in today’s dollars) for Jaylen and $1,800 (in today’s dollars) for Avery.

Avery’s IRA $85,000 and Jaylen’s IRA 105,000

Question:

The Jeffersons want to know the amount of required capital that will be necessary to have accumulated at retirement to supplement their assumed Social Security benefits to support their retirement goal of retiring at their full retirement age (FRA) of 67. They want to assume a 7% investment return on their retirement portfolio before they retire and a 5% return after they retire. They assume inflation will be 3% for their entire lives. They also assume they will work until their FRA, but their compensation will only reflect the cost of living adjustments at the 3% inflation rate. Finally, they do not plan to leave any of their retirement accounts to their children so they want to plan on the retirement account being empty in 30 years (the capital utilisation method is the CFP® world assumption unless told otherwise).