Jerry and his wife, Terry, are considering a major career change. Jerry is thinking about quitting IBM for a job with the U.S. Forest Service in Colorado. Terry does not work. Before leaving his high-paying job at IBM, Jerry has decided to analyze his familys financial situation.

Jerrys assets (today):

Total of $256,000 invested in the stock market, forecast to continue earning 11% as long as it is invested.

Jerrys future needs (timeline):

In 10 years: Two kids college educations (current cost is $80,000 eacheducation inflation rate is 7.8% annually and is forecast to remain at that level for the next 10 years).

In 15 years: Two kids weddings (current cost is $50,000 eachcosts are expected to rise by 3% annually).

In 20 years: Retirement (Jerry wants the equivalent of $5,000 per month today. Inflation is expected to be 3% annually UNTIL retirement (ignore inflation AFTER retirement). Jerry wants the EQUIVALENT of $5,000 per month to continue for 30 years (at which time, he is planning to die or move in with his children)).

The questions you need to answer:

1Does Jerry have enough saved to fund all of his future needs?

2If Jerry only earns 8% on his investments, how much will he need to save per month (starting now) to be able to retire (assuming everything else stays the same)?