1. Mr. and Mrs. Smith plan to retire in 20 years. They expect to enjoy 25 retirement years. Their estimate is that they will require $80,000 per year in addition to social security benefits to live their chosen lifestyle during the 25 retirement years. During the 25 years of retirement their invested monies are forecasted to earn a 3% average compounded annual rate of return. For the 20 years leading up to retirement their long term invested monies are forecasted to earn a 7% average compounded annual rate of return. The Smiths begin their 20 year saving for retirement period with a balance of $50,000 in their long term investment account. They plan to add annually to their long term investment account balance. Assume annual end of year contributions to the long term account balance.

1. How much will the Smiths need in the long term investment account when they begin their retirement phase of life?
2. How much will the Smiths need to add to the long term investment account annually during the saving for retirement 20 years leading up to the retirement phase? Remember that they begin with a $50,000 initial balance.